This document provides an overview of lease financing, hire purchase, and factoring. It defines lease financing as procuring assets through a lease agreement where the lessor finances the asset and the lessee uses it. Key types of leases include financial leases, operating leases, sale and lease back, and leveraged leasing. Hire purchase allows a purchaser to acquire an asset through installment payments with ownership transferring after full payment. Factoring involves the sale of receivables to a factor who provides financing against receivables and collects on debts.
There are different types of leasing agreements that can be used. A financial lease, or full pay out lease, transfers all risks and rewards of asset ownership to the lessee. The lessee's payments are designed to pay off the lessor's initial investment. In contrast, an operating lease does not transfer all ownership risks and rewards, has a shorter term than the asset's life, and may include maintenance from the lessor. Other types include sale-leaseback, direct leases between two or three parties, domestic vs international leases depending on parties' locations, import leases where the supplier is in another country, and leveraged leases where the lessor provides only part of the asset's funding.
This document discusses finance leases as a source of project finance. It defines leasing as a legal agreement where the lessor owns a capital asset and allows the lessee to use it by paying rentals. Leasing provides advantages like preserving lines of credit, improving cash management through lower rental payments compared to loan repayments, and flexibility to upgrade equipment. The main types of leases are finance leases and operating leases, with finance leases transferring substantially all the risks and rewards of asset ownership to the lessee.
This document provides an overview of lease financing. It discusses how lease financing originated in the United States in the 1950s and spread globally. Lease financing started gaining traction in India in the 1970s through companies like First Leasing Company of India. There are two main types of leases: operating leases which are short term, and finance leases which are long term. The document outlines the key parties, terms, types of assets, and advantages/limitations of lease financing. It provides context on the importance and institutions involved in lease financing in India.
This document discusses leasing, hire purchase, and merchant banking. It defines leasing as a contractual arrangement where a lessee pays a lessor for use of an asset. There are different types of leases such as operating leases and financial leases. Hire purchase allows goods to be leased with an option to purchase. Merchant banking provides services like underwriting shares and project counseling for a fee and facilitates production and trade.
Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments.
This document provides an overview of leasing and lease financing. It defines what a lease is and discusses the key aspects of lease agreements such as rental payments, maintenance clauses, cancellation provisions, renewal and purchase options.
It distinguishes between operating leases and finance/capital leases. Operating leases are typically short-term while finance leases are longer-term and transfer most of the risks and rewards of ownership to the lessee.
The document also covers the different methods of lease financing including sales-leasebacks, direct leases, and leveraged leases. It discusses the advantages and disadvantages of lease financing for both lessees and lessors. Finally, it compares long-term debt versus leasing
The document discusses leasing as an alternative to owning assets. It defines key terms like lessor, lessee, operating lease and financial lease. An operating lease is short-term while a financial lease allows the lessee to purchase the asset at the end. Leasing provides benefits to both lessors and lessees like saving capital upfront, flexibility, tax benefits, and improved cash flows. Lease evaluation involves determining costs and returns for both parties.
The document provides a detailed history of leasing from ancient times to the modern era. It discusses how leasing first emerged to finance equipment for industries like railroads and shipping in the 1700s-1900s. Major developments included the introduction of tax benefits in the 1950s to encourage capital investment, and the investment tax credit in the 1960s, which boosted the leasing industry. Subsequent changes to tax laws and accounting standards in the 1970s-1980s further established leasing as a mainstream financing option used by most large companies.
There are different types of leasing agreements that can be used. A financial lease, or full pay out lease, transfers all risks and rewards of asset ownership to the lessee. The lessee's payments are designed to pay off the lessor's initial investment. In contrast, an operating lease does not transfer all ownership risks and rewards, has a shorter term than the asset's life, and may include maintenance from the lessor. Other types include sale-leaseback, direct leases between two or three parties, domestic vs international leases depending on parties' locations, import leases where the supplier is in another country, and leveraged leases where the lessor provides only part of the asset's funding.
This document discusses finance leases as a source of project finance. It defines leasing as a legal agreement where the lessor owns a capital asset and allows the lessee to use it by paying rentals. Leasing provides advantages like preserving lines of credit, improving cash management through lower rental payments compared to loan repayments, and flexibility to upgrade equipment. The main types of leases are finance leases and operating leases, with finance leases transferring substantially all the risks and rewards of asset ownership to the lessee.
This document provides an overview of lease financing. It discusses how lease financing originated in the United States in the 1950s and spread globally. Lease financing started gaining traction in India in the 1970s through companies like First Leasing Company of India. There are two main types of leases: operating leases which are short term, and finance leases which are long term. The document outlines the key parties, terms, types of assets, and advantages/limitations of lease financing. It provides context on the importance and institutions involved in lease financing in India.
This document discusses leasing, hire purchase, and merchant banking. It defines leasing as a contractual arrangement where a lessee pays a lessor for use of an asset. There are different types of leases such as operating leases and financial leases. Hire purchase allows goods to be leased with an option to purchase. Merchant banking provides services like underwriting shares and project counseling for a fee and facilitates production and trade.
Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments.
This document provides an overview of leasing and lease financing. It defines what a lease is and discusses the key aspects of lease agreements such as rental payments, maintenance clauses, cancellation provisions, renewal and purchase options.
It distinguishes between operating leases and finance/capital leases. Operating leases are typically short-term while finance leases are longer-term and transfer most of the risks and rewards of ownership to the lessee.
The document also covers the different methods of lease financing including sales-leasebacks, direct leases, and leveraged leases. It discusses the advantages and disadvantages of lease financing for both lessees and lessors. Finally, it compares long-term debt versus leasing
The document discusses leasing as an alternative to owning assets. It defines key terms like lessor, lessee, operating lease and financial lease. An operating lease is short-term while a financial lease allows the lessee to purchase the asset at the end. Leasing provides benefits to both lessors and lessees like saving capital upfront, flexibility, tax benefits, and improved cash flows. Lease evaluation involves determining costs and returns for both parties.
The document provides a detailed history of leasing from ancient times to the modern era. It discusses how leasing first emerged to finance equipment for industries like railroads and shipping in the 1700s-1900s. Major developments included the introduction of tax benefits in the 1950s to encourage capital investment, and the investment tax credit in the 1960s, which boosted the leasing industry. Subsequent changes to tax laws and accounting standards in the 1970s-1980s further established leasing as a mainstream financing option used by most large companies.
Diminishing Musharakah is an Islamic financing structure where the financier and client jointly own an asset. The financier's share is divided into units that the client purchases over time through separate sale contracts, eventually becoming the sole owner. It involves three components: joint ownership through a Musharakah agreement between the bank and client, the client leasing the bank's share and paying rent, and the client gradually redeeming the bank's share by purchasing units. All schools of Islamic jurisprudence permit joint ownership and leasing one's share to a partner. The transactions cannot be combined but must occur independently through promises. An example shows a client obtaining 90% financing for an asset costing $300 million, with
This document defines leasing and summarizes the key elements of a lease agreement. It also classifies the main types of leases as follows:
1) Finance leases transfer substantially all risks and rewards of ownership to the lessee. The lease payments cover the asset's cost and provide a return for the lessor.
2) Operating leases do not transfer all ownership risks and rewards. The lease period is shorter than the asset's life and rentals do not cover its full cost.
3) Sales and lease backs involve an owner selling an asset to a lessor and then leasing it back.
4) Direct leases are between the lessee and lessor, while tripart
The document discusses lease financing and leasing. It defines a lease as a contractual agreement where the owner (lessor) transfers the right to use an asset to the user (lessee) for a period of time in return for rental payments. At the end of the lease period, the asset reverts back to the lessor unless ownership is transferred to the lessee. It distinguishes leases from loans and discusses the key elements of a lease, including the leased asset, lease period, rental payments, residual value, and end-of-term options. The document also describes different types of leases, particularly finance leases which transfer most of the risks and rewards of ownership to the lessee.
This document discusses problems and prospects of leasing in India. It defines leasing as an agreement where a lessor conveys the right to use an asset to a lessee in exchange for rent payments. Problems of the leasing industry include unhealthy competition, lack of qualified personnel, high taxes, and stamp duties. However, prospects are strong as leasing accounts for 6% of capital investment currently but could reach 15% as the economy grows. Leasing plays an important role in financing infrastructure development in sectors like rail, telecom, and power. Addressing taxation and regulatory issues could further accelerate growth of the leasing industry in India.
Other Financial Services-Leasing and Hire Purchase; Debt Securitization; Hous...Ashish Hande
This document discusses leasing and related financial concepts. It begins by defining leasing as an agreement between two parties, a leasing company and user, for the temporary possession and use of an asset for a specified period in exchange for rental payments. It then covers essential elements of leasing agreements, types of leasing, steps in leasing transactions, advantages and limitations of leasing, contents of lease agreements, and the structure of the leasing industry in India.
The document discusses various types of leases including financial leases, operating leases, sale and leaseback arrangements, and international leasing. It defines key lease terms and parties. It also outlines the regulatory framework for leases under contract law and discusses lease documentation and agreements.
This ppt is covering lease finance in detail, covering advantages & disadvantages. Types of lease. Instead of doing hard work rely on smart work. Time you devote on copy pasting. Channelize that time in understanding topic via reading it.
Lease financing involves an arrangement where the owner (lessor) of an asset transfers possession and right to use the asset to another party (lessee) for an agreed period of time in exchange for rental payments. There are two main types of leases: finance leases and operating leases. Finance leases typically involve long-term agreements where the lessee takes on most of the risks and benefits of asset ownership, while operating leases are usually shorter term agreements where the lessor retains responsibility for the asset. Lease financing can provide businesses with an alternative to purchasing assets outright and offers tax benefits compared to other forms of financing.
Financial management term loans and lease financingmahi50
This document provides information on term loans and lease financing. It defines a term loan as a loan that is repaid with regular payments over a set time period, usually between 1-30 years. Term loans are commonly used for small business loans to finance expanding operations. The document also defines a lease as a contract where the owner of an asset allows another party to use the asset for an agreed period in exchange for rent payments. Various types of leases are described including financial leases, operating leases, and sale-leaseback arrangements. Considerations for term loans like fixed vs floating interest rates are also discussed.
The document discusses operating and financial leasing, fleet leasing, and the comparative advantages of leasing over purchasing vehicles. It also provides details on PT. Surya NordFinans, their client base, and sample lease documentation including agreements, schedules, and invoices.
This document provides an overview of leasing and hire purchase agreements. It discusses the history and types of lease agreements including financial leases, operating leases, sale and lease back, leveraged leasing, and direct leasing. It outlines the advantages of leasing such as saving capital, flexibility, planning cash flows, and tax advantages. It also discusses the disadvantages of leasing including early termination penalties, higher insurance costs, lack of ownership, and long term expenses. Examples of leasing companies in India are provided. Hire purchase agreements are also introduced as a similar financing method.
There are two main types of leasing arrangements: finance (or capital) leases and operating leases. A finance lease involves the lessee selecting an asset that the lessor purchases and the lessee pays rentals to use. The lessee typically has the option to purchase the asset at the end. An operating lease is a short-term rental of an asset where ownership remains with the lessor and maintenance is usually the lessee's responsibility. Hire purchase allows a buyer to obtain goods by paying in installments, with ownership transferring after the final payment. Key differences between leases and hire purchase include who owns the asset, who claims depreciation, duration, and responsibility for repairs.
This document provides an introduction to corporate finance leasing. It begins with learning objectives which are to understand the basic characteristics and accounting treatment of operating and financial leases, as well as how to evaluate lease decisions. Key terms like operating lease, financial lease, and sale-leaseback agreement are introduced. The major types of leasing arrangements - operating leases, financial leases, conditional sales agreements, and sale-leaseback agreements - are then defined and distinguished. The document concludes by explaining how to evaluate the decision to lease versus buy by comparing the cash flow implications of each option.
Leasing is a contract where an owner (lessor) provides an asset to a user (lessee) for a fixed period of time in exchange for regular payments (rentals). There are two main types of leases: finance leases, where the lessee is effectively the asset's owner, and operating leases, where the lessor retains ownership. Finance leases typically cover most of an asset's useful life while operating leases are shorter. Other lease types include leveraged leases which involve multiple parties, and sale and leaseback where an asset is sold and then leased back from the buyer.
This document discusses Diminishing Musharakah, an Islamic financing structure where a bank and customer jointly own an asset. The bank's share is divided into units that the customer purchases over time, increasing their ownership until becoming sole owner. It provides examples of assets financed this way like houses, cars, and machinery. The structure involves creating joint ownership, renting the bank's share to the customer, and the customer purchasing units from the bank over time until owning the asset solely. However, combining all transactions into a single arrangement is not allowed in Islamic law as one cannot make one transaction conditional on another.
The document outlines the basic rules and concepts of Ijara, an Islamic leasing contract. It discusses that Ijara involves transferring the use of an asset, not ownership, for a predetermined rental price and period. The lessor bears risks and costs of ownership while the lessee is responsible for any damage caused by misuse. The document also explains how Ijara can be structured as a financing technique in accordance with Shariah principles by having distinct sale and lease contracts and avoiding interest.
This document compares lease and hire purchase agreements. A lease is a contract allowing one party to use land, property or services for a specified time in exchange for periodic payments but the user does not own the asset. Hire purchase allows a buyer to pay for an item through regular installments while using it, with the goal of eventual ownership. The two agreements differ in ownership, financing structure, accounting of depreciation, available tax benefits, treatment of salvage value, required deposits, rent-to-own options, extent of financing, responsibility for maintenance, and financial reporting requirements.
Conditional formatting allows users to format cells differently depending on their values. Users can apply formatting like cell shading to highlight cells where sales exceed or fall short of forecasts. To set conditional formatting, users select the cells to format, specify the formatting conditions, and select formatting options for things like font, border, and fill. Advanced filtering allows users to filter lists to display only rows that meet criteria specified for one or multiple columns, including criteria based on formulas. Users can filter lists in-place or copy matching rows to another location.
The document discusses financial services and their evolution in India. It defines financial services and classifies them into capital market and money market intermediaries. It outlines the three phases of evolution of financial services in India from 1960-2002 and how liberalization transformed the sector. Key financial services discussed include leasing, merchant banking, and the various constituents and players in the financial system like instruments, institutions, and regulatory bodies.
This document outlines the curriculum for a 10-week course covering insurance and banking. The course is divided into two sections: Section A focuses on insurance topics like the concepts of insurance, life insurance practices in India, and general insurance; Section B covers banking topics such as the Indian banking system, credit processes, risk management, and innovations in international banking. Some key topics discussed include types of insurance policies, actuarial principles, analyzing bank financial statements, credit risk assessment, and Basel capital adequacy norms. The course aims to provide an introduction to the basic concepts, principles, and practices in both the insurance and banking industries.
Diminishing Musharakah is an Islamic financing structure where the financier and client jointly own an asset. The financier's share is divided into units that the client purchases over time through separate sale contracts, eventually becoming the sole owner. It involves three components: joint ownership through a Musharakah agreement between the bank and client, the client leasing the bank's share and paying rent, and the client gradually redeeming the bank's share by purchasing units. All schools of Islamic jurisprudence permit joint ownership and leasing one's share to a partner. The transactions cannot be combined but must occur independently through promises. An example shows a client obtaining 90% financing for an asset costing $300 million, with
This document defines leasing and summarizes the key elements of a lease agreement. It also classifies the main types of leases as follows:
1) Finance leases transfer substantially all risks and rewards of ownership to the lessee. The lease payments cover the asset's cost and provide a return for the lessor.
2) Operating leases do not transfer all ownership risks and rewards. The lease period is shorter than the asset's life and rentals do not cover its full cost.
3) Sales and lease backs involve an owner selling an asset to a lessor and then leasing it back.
4) Direct leases are between the lessee and lessor, while tripart
The document discusses lease financing and leasing. It defines a lease as a contractual agreement where the owner (lessor) transfers the right to use an asset to the user (lessee) for a period of time in return for rental payments. At the end of the lease period, the asset reverts back to the lessor unless ownership is transferred to the lessee. It distinguishes leases from loans and discusses the key elements of a lease, including the leased asset, lease period, rental payments, residual value, and end-of-term options. The document also describes different types of leases, particularly finance leases which transfer most of the risks and rewards of ownership to the lessee.
This document discusses problems and prospects of leasing in India. It defines leasing as an agreement where a lessor conveys the right to use an asset to a lessee in exchange for rent payments. Problems of the leasing industry include unhealthy competition, lack of qualified personnel, high taxes, and stamp duties. However, prospects are strong as leasing accounts for 6% of capital investment currently but could reach 15% as the economy grows. Leasing plays an important role in financing infrastructure development in sectors like rail, telecom, and power. Addressing taxation and regulatory issues could further accelerate growth of the leasing industry in India.
Other Financial Services-Leasing and Hire Purchase; Debt Securitization; Hous...Ashish Hande
This document discusses leasing and related financial concepts. It begins by defining leasing as an agreement between two parties, a leasing company and user, for the temporary possession and use of an asset for a specified period in exchange for rental payments. It then covers essential elements of leasing agreements, types of leasing, steps in leasing transactions, advantages and limitations of leasing, contents of lease agreements, and the structure of the leasing industry in India.
The document discusses various types of leases including financial leases, operating leases, sale and leaseback arrangements, and international leasing. It defines key lease terms and parties. It also outlines the regulatory framework for leases under contract law and discusses lease documentation and agreements.
This ppt is covering lease finance in detail, covering advantages & disadvantages. Types of lease. Instead of doing hard work rely on smart work. Time you devote on copy pasting. Channelize that time in understanding topic via reading it.
Lease financing involves an arrangement where the owner (lessor) of an asset transfers possession and right to use the asset to another party (lessee) for an agreed period of time in exchange for rental payments. There are two main types of leases: finance leases and operating leases. Finance leases typically involve long-term agreements where the lessee takes on most of the risks and benefits of asset ownership, while operating leases are usually shorter term agreements where the lessor retains responsibility for the asset. Lease financing can provide businesses with an alternative to purchasing assets outright and offers tax benefits compared to other forms of financing.
Financial management term loans and lease financingmahi50
This document provides information on term loans and lease financing. It defines a term loan as a loan that is repaid with regular payments over a set time period, usually between 1-30 years. Term loans are commonly used for small business loans to finance expanding operations. The document also defines a lease as a contract where the owner of an asset allows another party to use the asset for an agreed period in exchange for rent payments. Various types of leases are described including financial leases, operating leases, and sale-leaseback arrangements. Considerations for term loans like fixed vs floating interest rates are also discussed.
The document discusses operating and financial leasing, fleet leasing, and the comparative advantages of leasing over purchasing vehicles. It also provides details on PT. Surya NordFinans, their client base, and sample lease documentation including agreements, schedules, and invoices.
This document provides an overview of leasing and hire purchase agreements. It discusses the history and types of lease agreements including financial leases, operating leases, sale and lease back, leveraged leasing, and direct leasing. It outlines the advantages of leasing such as saving capital, flexibility, planning cash flows, and tax advantages. It also discusses the disadvantages of leasing including early termination penalties, higher insurance costs, lack of ownership, and long term expenses. Examples of leasing companies in India are provided. Hire purchase agreements are also introduced as a similar financing method.
There are two main types of leasing arrangements: finance (or capital) leases and operating leases. A finance lease involves the lessee selecting an asset that the lessor purchases and the lessee pays rentals to use. The lessee typically has the option to purchase the asset at the end. An operating lease is a short-term rental of an asset where ownership remains with the lessor and maintenance is usually the lessee's responsibility. Hire purchase allows a buyer to obtain goods by paying in installments, with ownership transferring after the final payment. Key differences between leases and hire purchase include who owns the asset, who claims depreciation, duration, and responsibility for repairs.
This document provides an introduction to corporate finance leasing. It begins with learning objectives which are to understand the basic characteristics and accounting treatment of operating and financial leases, as well as how to evaluate lease decisions. Key terms like operating lease, financial lease, and sale-leaseback agreement are introduced. The major types of leasing arrangements - operating leases, financial leases, conditional sales agreements, and sale-leaseback agreements - are then defined and distinguished. The document concludes by explaining how to evaluate the decision to lease versus buy by comparing the cash flow implications of each option.
Leasing is a contract where an owner (lessor) provides an asset to a user (lessee) for a fixed period of time in exchange for regular payments (rentals). There are two main types of leases: finance leases, where the lessee is effectively the asset's owner, and operating leases, where the lessor retains ownership. Finance leases typically cover most of an asset's useful life while operating leases are shorter. Other lease types include leveraged leases which involve multiple parties, and sale and leaseback where an asset is sold and then leased back from the buyer.
This document discusses Diminishing Musharakah, an Islamic financing structure where a bank and customer jointly own an asset. The bank's share is divided into units that the customer purchases over time, increasing their ownership until becoming sole owner. It provides examples of assets financed this way like houses, cars, and machinery. The structure involves creating joint ownership, renting the bank's share to the customer, and the customer purchasing units from the bank over time until owning the asset solely. However, combining all transactions into a single arrangement is not allowed in Islamic law as one cannot make one transaction conditional on another.
The document outlines the basic rules and concepts of Ijara, an Islamic leasing contract. It discusses that Ijara involves transferring the use of an asset, not ownership, for a predetermined rental price and period. The lessor bears risks and costs of ownership while the lessee is responsible for any damage caused by misuse. The document also explains how Ijara can be structured as a financing technique in accordance with Shariah principles by having distinct sale and lease contracts and avoiding interest.
This document compares lease and hire purchase agreements. A lease is a contract allowing one party to use land, property or services for a specified time in exchange for periodic payments but the user does not own the asset. Hire purchase allows a buyer to pay for an item through regular installments while using it, with the goal of eventual ownership. The two agreements differ in ownership, financing structure, accounting of depreciation, available tax benefits, treatment of salvage value, required deposits, rent-to-own options, extent of financing, responsibility for maintenance, and financial reporting requirements.
Conditional formatting allows users to format cells differently depending on their values. Users can apply formatting like cell shading to highlight cells where sales exceed or fall short of forecasts. To set conditional formatting, users select the cells to format, specify the formatting conditions, and select formatting options for things like font, border, and fill. Advanced filtering allows users to filter lists to display only rows that meet criteria specified for one or multiple columns, including criteria based on formulas. Users can filter lists in-place or copy matching rows to another location.
The document discusses financial services and their evolution in India. It defines financial services and classifies them into capital market and money market intermediaries. It outlines the three phases of evolution of financial services in India from 1960-2002 and how liberalization transformed the sector. Key financial services discussed include leasing, merchant banking, and the various constituents and players in the financial system like instruments, institutions, and regulatory bodies.
This document outlines the curriculum for a 10-week course covering insurance and banking. The course is divided into two sections: Section A focuses on insurance topics like the concepts of insurance, life insurance practices in India, and general insurance; Section B covers banking topics such as the Indian banking system, credit processes, risk management, and innovations in international banking. Some key topics discussed include types of insurance policies, actuarial principles, analyzing bank financial statements, credit risk assessment, and Basel capital adequacy norms. The course aims to provide an introduction to the basic concepts, principles, and practices in both the insurance and banking industries.
The document contains daily stock price data for 9 companies (ACC, BPCL, etc.) and the Nifty index over multiple dates. The prices range from over 1,000 to under 200 for individual stocks, while the Nifty index ranges from around 6,000 to under 1,000. The data is presented in tabular format with company stock symbols in the left column and daily closing prices listed horizontally for each date.
The document appears to contain stock price data for various companies listed column-wise with dates listed row-wise. There are daily closing price figures ranging from large positive to large negative numbers listed for companies like ACC, BPCL, Dr. Reddy, HUL, ICICI Bank, Reliance, Tata Motors and stock indices like Nifty.
Michael Porter suggests three winning competitive strategies that companies can follow - overall cost leadership, differentiation, and focus. The document then discusses these strategies and provides examples of companies that employ each strategy. It also discusses the concepts of target market selection and identifying a company's competitors from both an industry and market point of view.
This document discusses developing competitive advantages for small businesses. It begins by explaining the importance of identifying a sustainable competitive advantage, especially for new small businesses entering existing markets. The document then examines various strategies small businesses can use to develop competitive advantages, including leveraging different elements of the marketing mix like product, price, place, promotion, and people. It provides examples of how both large and small companies have effectively developed competitive advantages in these areas. The document concludes by discussing some key issues for small businesses to consider related to developing a competitive advantage, such as costs, management leadership, and organizational culture.
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
(1) Organization development (OD) is defined as a planned, organization-wide effort to increase effectiveness and health through interventions that change beliefs, attitudes, values, and structure. (2) OD draws on behavioral science and involves collaboration, long-term planning, systems thinking, and evidence-based change. (3) Key aspects of OD include addressing organization-wide issues, using change agents, taking action, emphasizing performance and learning, and having a humanistic, problem-solving orientation.
Porter's generic strategies framework outlines three types of competitive advantage - cost leadership, differentiation, and focus. Firms can pursue one of these advantages across a broad or narrow scope. Competitive advantage is created through value chain activities that are difficult for competitors to imitate. It is sustained through durable sources of advantage, multiple distinct sources, and continuous upgrading. Alternatively, the core competence framework emphasizes developing dynamic capabilities rather than positioning within an industry. Core competencies allow firms to enter new markets and are sustained through continuous investment. Both frameworks provide guidance for analyzing competitive advantage but must be tailored to a specific company's challenges.
Marketing strategy involves understanding customers' needs and wants so well that products sell themselves. It also involves monitoring the business environment constantly and modifying the strategy accordingly. A strategy helps organizations achieve long-term goals by specifying what needs to be achieved, how, and through optimal resource allocation to gain sustainable competitive advantages. Competitive strategies focus on how a company competes in its industry to gain an advantage through its distinctive approach.
The document appears to contain monthly stock market data over several years, including figures for high, low, opening and closing prices as well as totals for volume and value traded. Specific dates ranging from 2011 to early 2000s are listed in the first column. Corresponding price and trading data are provided in subsequent columns.
Euro Disney opened in 1992 in France and struggled initially due to underestimating cultural differences and a recession in Europe. It saw low attendance and profits compared to projections. Disney made changes like adding local culture and language to attractions, but it took years for Euro Disney to become profitable as it adapted to the European market. By the late 1990s, attendance and profits had increased after Disney addressed operational and service issues.
The document discusses key concepts in services marketing. It defines services and differentiates them from goods. Services are intangible activities that are performed for others and do not result in ownership. The key characteristics of services that make them different to market are their intangibility, heterogeneity, inseparability of production and consumption, and perishability. Solutions to issues created by these characteristics include using tangible clues to demonstrate quality, emphasizing training of customer-facing staff, and flexible pricing and scheduling to manage demand. Customers go through a decision process of need recognition, information search, alternative evaluation, purchase, and post-purchase evaluation when choosing a service. This impacts how service providers should market to customers.
The document provides an overview of business environment, its nature, components, dynamics and importance. It discusses the internal and external factors affecting a business. The external environment includes micro factors like suppliers, customers, competitors and macro factors like economic, political, social, technological, demographic and international elements. It also outlines the risks faced from the business environment and various measures to manage such risks.
Leveraged buyouts (LBOs) involve using a large amount of debt to purchase a firm. Typically over 80% of the purchase price is financed through debt secured by the acquired firm's assets. Good LBO candidates have stable cash flows to service the debt, assets to collateralize loans, and a strong competitive position. The APV (adjusted present value) method values a leveraged firm by separately considering the value of operations and tax benefits of debt net of distress costs from high leverage.
The document discusses various aspects of credit risk and risk management in banks. It covers topics like the different types of credit risk, obstacles in credit risk management, methods to reduce credit risks, credit derivatives, securitization process, Basel accords, asset-liability management, capital adequacy ratio, and interest rate risk.
The document discusses the evolution of the banking structure in India and provides details on the various components of the Indian banking system. It summarizes the key recommendations of the Narasimham Committee reports which aimed to reform the banking sector and enhance efficiency. It also explains some basic banking concepts like PLR, repo rate, reverse repo rate, CRR, and SLR.
Leasing is a process where a firm can obtain use of a fixed asset by making a series of tax deductible payments over time. A lease is a contractual agreement where the owner (lessor) provides an asset to a user (lessee) for a period of time in exchange for periodic rental payments. There are two main types of leases: a finance lease, where ownership essentially transfers to the lessee, and an operating lease, where the lease term is shorter than the asset's economic life and the lessee can terminate with limited penalties. Leasing arrangements can also take different forms like a sale and leaseback, single investor lease, or leveraged lease.
This document discusses leasing and hire purchase. It defines leasing as a contract where the owner of an asset grants another party exclusive use of the asset for an agreed period in exchange for rent payments. Hire purchase allows a party to take possession of a good by paying in installments, with ownership transferring after all payments are made. The document outlines the key features, types, advantages and disadvantages of both leasing and hire purchase agreements.
The document discusses lease financing and different types of lease contracts. It defines a lease as an agreement where a lessor allows a lessee to use an asset for a specified period in exchange for rental payments. There are two main types of leases: operating leases and financial leases. An operating lease involves the lessor maintaining ownership of the asset and responsibility for maintenance, while a financial lease transfers most of the risks and rewards of ownership to the lessee. The key differences between the two lease types are also outlined.
This document provides information on leasing and hire purchasing. It defines leasing as a contract that conveys the right to use an asset for a specified period of time in exchange for rental payments. Hire purchasing allows goods to be bought through periodic installment payments, with ownership transferring after the final payment. The document discusses the participants in leasing agreements, different types of leases such as financial and operating leases, and regulations related to leasing in India. It also provides basics of hire purchasing agreements.
Financial Lease document presented definitions of leasing, its history dating back to ancient civilizations, and main types of leases including capital/financial leases, operating leases, sale and leaseback, leveraged leasing, and direct leases. Advantages and disadvantages of leasing for lessees and lessors were discussed. The document also covered Islamic "Ijara" leasing, lease calculations, differences between loans and leases, the leasing market in Egypt with the top companies, and concluded that developing leasing could help spread risks and support Egypt's economy.
The document discusses leasing and hire purchase. It provides definitions of leasing and hire purchase. It outlines the key parties involved in leasing (lessor and lessee) and hire purchase (owner and hirer). It also discusses the history and development of leasing and hire purchase in various regions including India. The document then covers types of leases, guidelines for banks involved in hire purchase business, and factors to consider like customer assessment, purpose, amount, period, repayment, and security."
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Leasing involves a lessor providing equipment or property to a lessee in exchange for periodic payments. There are several types of leases, including finance leases where ownership transfers to the lessee, and operating leases which are shorter term. Key elements of any lease include the parties, asset, lease term, and rental payments. The leasing process involves selecting an asset, signing a lease agreement, and the lessor acquiring the asset for the lessee. Leasing provides advantages to both lessors and lessees such as tax benefits and avoiding large upfront costs.
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1. LESSON-15
LEASE FINANCING, HIRE -
PURCHASE AND FACTORING
Rekha Rani
STRUCTURE
15.0 Introduction
15.1 Objectives
15.2 Concept of Lease Financing
15.3 Meaning of Lease Financing
15.4 Importance of Lease Financing
15.5 Types of Lease Agreements
15.5.1 Financial lease
15.5.2 Operating lease
15.5.3 Sale and lease back
15.5.4 Leveraged leasing
15.5.5 Direct leasing
15.6 Advantages of leasing
15.7 Leasing in India
15.8 Concept & Meaning of Hire purchase
15.9 Difference between Lease Financing and Hire Purchase
15.10 NSIC & Hire Purchase
15.11 Factoring
15.11.1 Factoring procedure
15.11.2 Merits
15.12 Summary
15.13 Glossary
15.14 Self Assessment Questions
15.15 Further Readings
15.0 INTRODUCTION
In order to start and sustain a business one needs finance. In the unit one on feasibility
study, you have already seen the process of estimating financial requirements. The
process involved (a) making a list of all the assets (b) identifying the sources of
supply (c) estimating the cost of acquisition when the assets are to be acquired on
outright basis. Then investment requirements as well as entrepreneur’s fear will
increase. To scare away the entrepreneur’s fear, the emphasis should be given to
resources and not to the ownership. In this unit we intend to familiarize you with
some important financial innovations i.e., leasing, hire purchase and factoring.
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2. 15.1 OBJECTIVES
After going through this unit you should be able to
• Describe the meaning of leasing
• Explain the role and importance of lease financing in economic development of a
country
• Distinguish between the various types of leases
• Describe the meaning of hire purchase
• Distinguish between leasing and hire purchase
• Describe the meaning of factoring
15.2 CONCEPT 0F LEASE FINANCING
Lease financing denotes procurement of assets through lease. The subject of
leasing falls in the category of finance. Leasing has grown as a big industry in the
USA and UK and spread to other countries during the present century. In India,
the concept was pioneered in 1973 when the First Leasing Company was set up in
Madras and the eighties have seen a rapid growth of this business. Lease as a
concept involves a contract whereby the ownership, financing and risk taking of
any equipment or asset are separated and shared by two or more parties. Thus, the
lessor may finance and lessee may accept the risk through the use of it while a
third party may own it. Alternatively the lessor may finance and own it while the
lessee enjoys the use of it and bears the risk. There are various combinations in
which the above characteristics are shared by the lessor and lessee.
15.3 MEANING 0F LEASE FINANCING
A lease transaction is a commercial arrangement whereby an equipment owner or
Manufacturer conveys to the equipment user the right to use the equipment in return
for a rental. In other words, lease is a contract between the owner of an asset (the
lessor) and its user (the lessee) for the right to use the asset during a specified period
in return for a mutually agreed periodic payment (the lease rentals). The important
feature of a lease contract is separation of the ownership of the asset from its usage.
Lease financing is based on the observation made by Donald B. Grant:
“Why own a cow when the milk is so cheap? All you really need is milk and not the
cow.”
15.4 IMPORTANCE 0F LEASE FINANCING
Leasing industry plays an important role in the economic development of a country by
providing money incentives to lessee. The lessee does not have to pay the cost of asset
at the time of signing the contract of leases. Leasing contracts are more flexible so
lessees can structure the leasing contracts according to their needs for finance. The
lessee can also pass on the risk of obsolescence to the lessor by acquiring those
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3. appliances, which have high technological obsolescence. To day, most of us are
familiar with leases of houses, apartments, offices, etc.
15.5 TYPES OF LEASE AGREEMENTS
Lease agreements are basically of two types. They are (a) Financial lease and (b)
Operating lease. The other variations in lease agreements are (c) Sale and lease back
(d) Leveraged leasing and (e) Direct leasing.
LEASE
AGREEMENTS
CAPITAL OPERATING SALE AND LEASE LEVERAGED DIRECT LEASING
LEASE/FINANCIA LEASE BACK LEASING
L LEASE
Figure 15.1: Types of leases
15.5.1 FINANCIAL LEASE
Long-term, non-cancellable lease contracts are known as financial leases. The
essential point of financial lease agreement is that it contains a condition whereby the
lessor agrees to transfer the title for the asset at the end of the lease period at a
nominal cost. At lease it must give an option to the lessee to purchase the asset he has
used at the expiry of the lease. Under this lease the lessor recovers 90% of the fair
value of the asset as lease rentals and the lease period is 75% of the economic life of
the asset. The lease agreement is irrevocable. Practically all the risks incidental to the
asset ownership and all the benefits arising there from are transferred to the lessee
who bears the cost of maintenance, insurance and repairs. Only title deeds remain
with the lessor. Financial lease is also known as ‘capital lease’. In India, financial
leases are very popular with high-cost and high technology equipment.
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4. 15.5.2 OPERATING LEASE
An operating lease stands in contrast to the financial lease in almost all aspects. This
lease agreement gives to the lessee only a limited right to use the asset. The lessor is
responsible for the upkeep and maintenance of the asset. The lessee is not given any
uplift to purchase the asset at the end of the lease period. Normally the lease is for a
short period and even otherwise is revocable at a short notice. Mines, Computers
hardware, trucks and automobiles are found suitable for operating lease because the
rate of obsolescence is very high in this kind of assets.
Key Words
Explain the meaning of ‘long term,’ ‘nominal cost,’ and economic life
Activity A
On the basis of above description of financial lease and operating lease, find out three
main differences between two.
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15.5.3 SALE AND LEASE BACK
It is a sub-part of finance lease. Under this, the owner of an asset sells the asset to a
party (the buyer), who in turn leases back the same asset to the owner in consideration
of lease rentals. However, under this arrangement, the assets are not physically
exchanged but it all happens in records only. This is nothing but a paper transaction.
Sale and lease back transaction is suitable for those assets, which are not subjected
depreciation but appreciation, say land. The advantage of this method is that the
lessee can satisfy himself completely regarding the quality of the asset and after
possession of the asset convert the sale into a lease arrangement. The sale and lease
back transaction can be expressed with the help of the following figure.
SELLER SALE TRANSACTION BUYER
SALE VALUE
LEASE TRANSACTION
LESSEE LESSOR
LEASE RENTALS
Figure 15.2: Structure of a Sale and Leaseback Deal
Under this transaction, the seller assumes the role of a lessee and the buyer assumes
the role of a lessor. The seller gets the agreed selling price and the buyer gets the lease
rentals. It is possible to structure the sale at agreed value (below or above the fair
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5. market price) and to adjust difference in the lease rentals. Thus the effect of profit
/loss on sale of assets can be deferred.
15.5.4 LEVERAGED LEASING
Under leveraged leasing arrangement, a third party is involved beside lessor and
lessee. The lessor borrows a part of the purchase cost (say 80%) of the asset from the
third party i.e., lender and the asset so purchased is held as security against the loan.
The lender is paid off from the lease rentals directly by the lessee and the surplus after
meeting the claims of the lender goes to the lessor. The lessor, the owner of the asset
is entitled to depreciation allowance associated with the asset.
Sells Asset Leases Asset
Manufacturer Lessor Lessee
L
Lender
Figure 15. 3: Leveraged Lease
Activity B
Distinguish between sale and lease back lease and leveraged lease. As a lessee, which
one will you prefer and why?
15.5.5 DIRECT LEASING
Under direct leasing, a firm acquires the right to use an asset from the manufacturer
directly. The ownership of the asset leased out remains with the manufacturer itself.
The major types of direct lessor include manufacturers, finance companies,
independent lease companies, special purpose leasing companies etc
15.6 ADVANTAGES OF LEASING
There are several extolled advantages of acquiring capital assets on lease:
(1) SAVING OF CAPITAL: Leasing covers the full cost of the equipment used in the
business by providing 100% finance. The lessee is not to provide or pay any margin
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6. money as there is no down payment. In this way the saving in capital or financial
resources can be used for other productive purposes e.g. purchase of inventories.
(2) FLEXIBILITY AND CONVENIENCE: The lease agreement can be tailor- made
in respect of lease period and lease rentals according to the convenience and
requirements of all lessees.
(3) PLANNING CASH FLOWS: Leasing enables the lessee to plan its cash flows
properly. The rentals can be paid out of the cash coming into the business from the
use of the same assets.
(4) IMPROVEMENT IN LIQUADITY: Leasing enables the lessee to improve their
liquidity position by adopting the sale and lease back technique.
15.7 LEASING IN INDIA
Leasing has grown by leaps and bounds in the eighties but it is estimated that hardly
1% of the industrial investment in India is covered by the lease finance, as against
40% in USA and 30% in UK and 10% in Japan. The prospects of leasing in India are
good due to growing investment needs and scarcity of funds with public financial
institutions. This type of lease finances is particularly suitable in India where a large
number of small companies have emerged more recently. Leasing in the sphere of
land and building has been in existence in India for a long time, while equipment
leasing has become very common in the recent times.
Activity C
Find out in your locality some companies that under take lease financing of
machinery.
15.8 CONCEPT AND MEANING OF HIRE
PURCHASE
Hire purchase is a type of instalment credit under which the hire purchaser, called the
hirer, agrees to take the goods on hire at a stated rental, which is inclusive of the
repayment of principal as well as interest, with an option to purchase. Under this
transaction, the hire purchaser acquires the property (goods) immediately on signing
the hire purchase agreement but the ownership or title of the same is transferred only
when the last instalment is paid. The hire purchase system is regulated by the Hire
Purchase Act 1972. This Act defines a hire purchase as “an agreement under which
goods are let on hire and under which the hirer has an option to purchase them in
accordance with the terms of the agreement and includes an agreement under which:
1) The owner delivers possession of goods thereof to a person on condition that
such person pays the agreed amount in periodic instalments.
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7. 2) The property in the goods is to pass to such person on the payment of the last
of such instalments, and
3) Such person has a right to terminate the agreement at any time before the
property so passes”.
Hire purchase should be distinguished from instalment sale wherein property passes
to the purchaser with the payment of the first instalment. But in case of HP
(ownership remains with the seller until the last instalment is paid) buyer gets
ownership after paying the last instalment. HP also differs form leasing.
15.9 DIFFERENCE BETWEEN LEASE FINANCING
AND HIRE PURCHASE
BASIS LEASE FINANCING HIRE PURCHASE
Meaning A lease transaction is a Hire purchase is a type of
commercial arrangement, instalment credit under
whereby an equipment which the hire purchaser
owner or manufacturer agrees to take the goods on
conveys to the equipment hire at a stated rental,
user the right to use the which is inclusive of the
equipment in return for a repayment of principal as
rental. well as interest, with an
option to purchase.
Option to user No option is provided to Option is provided to the
the lessee (user) to hirer (user).
purchase the goods.
Nature of expenditure Lease rentals paid by the Only interest element
lessee are entirely revenue included in the HP
expenditure of the lessee. instalments is revenue
expenditure by nature.
Components Lease rentals comprise of HP instalments comprise
2 elements (1) finance of 3 elements (1) normal
charge and (2) capital trading profit (2) finance
recovery. charge and (3) recovery of
cost of goods/assets.
15.10 NSIC AND HIRE PURCHASE
Small scale firms can acquire industrial machinery, office equipment, vehicles, etc.,
without making full payment through hire purchase. With the help of assets acquired
through hire purchase they can produce and sell. From the earning payments can
easily be made in instalments. Ultimately the ownership of assets can be acquired.
Now several agencies like National Small Industries Corporation (NSIC) provide
machinery and equipment to small scale units on hire purchase basis and on lease
basis. NSIC follows the following Hire Purchase procedure and Hire Purchase
Scheme for financing plant and machinery to small scale units.
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8. Hire Purchase
"Finance of Plant & Machinery to small scale
industrial units/ enterprises on installment
terms."
15.11 FACTORING
Factoring is another type of financial service provided by the specialist organizations.
When small scale firms sell on credit basis, collection of receivable poses a problem.
In that case factoring organizations play an important role in collection of debtors.
Factoring involves sale of receivables to specialized firm, called factors. Factors
collect receivables and also advance cash against receivables to solve the client firm’s
liquidity problem. For providing their services, they charge interest on advance and
commission for other services. In other words, factoring is an arrangement under
which a financial institution (called factor) undertakes the task of collecting the book
debts of its client in return for a service charge in the form of discount or rebate. The
factoring institution eliminates the client’s risk of bad debts by taking over the
responsibility of book debts due to the client. The factoring institution advances a
proportion of the value of book debts of the client immediately and the balance on
maturity of book debts.
15.11.1 FACTORING PROCEDURE
The agreement between the supplier and the factor specifies the factoring procedure.
Usually the firm sends the customer’s order to the factor for evaluating the customer’s
creditworthiness and approval. Once the factor is satisfied about the customer’s credit
worthiness and agrees to buy receivables, the firm dispatches goods to the customer.
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9. The customer will be informed that his account has been sold to the factor, and he is
instructed to make payment directly to the factor. To perform his functions of credit
evaluation and collection for a large number of clients, a factor may maintain a credit
department with specialized staff. Once the factor has purchased a firm’s receivables
and if he agrees to own them, he will have to provide protection against any bad-debt
losses to the firm.
15.11.2 MERITS
1. As a result of factoring services, the enterprise can concentrate on manufacturing
and selling.
2. The risk of bad debts is eliminated.
3. The factoring institution also provides advice on business trends and other related
matters.
In India, subsidiaries of four Indian banks-State Bank of India, Canara Bank, Punjab
National Bank and Allahabad Bank are providing factoring services.
Activity D
Match the following
Nature of Asset Type of Lease
Aircraft/ ship with crew Operating lease
Construction equipment Wet lease
Sugar mill Finance lease
15.12 SUMMARY
A lease is an agreement for the use of the asset for a specified rental. The owner of the
asset is called the lessor and the user the lessee. Two important categories of leases
are: operating leases and financial leases. Operating leases are short team, cancellable
leases where the risk of obsolescence is borne by the lessor. Financial leases are long-
term, non-cancellable leases where any risk in the use of the asset is borne by the
lessee and he enjoys the returns too. The other sub-parts of finance lease are: sale and
lease back and leveraged financing. Under sale and lease back lease the owner of an
asset sells the asset to a party, who in turn leases back the same asset to the owner in
consideration of lease rentals. Under leveraged leasing a third party (i.e. financier or
lender) is involved beside lessor and lessee. Direct lease another type of leases, which
is popularly used. Under this, a firm acquires the right to use an asset from the
manufacturer directly. Leasing plays an important role in the economic development
of a country by providing money incentives to lessee. Lease financing has several
advantages. In India, the First Leasing Company Ltd. was set up in Madras in 1973.
As per the industrial investment, lease finance in India just like a newborn baby. Hire
purchase and factoring are the other forms of financial services. Hire purchase is a
type of instalment credit under which the hire purchaser agrees to take the goods on
235
10. hire at a stated rental. The system of the hire purchase is regulated by the Hire
Purchase Act 1972. Small scale firms suffer from the problem of dearth of funds. In
this case hire purchase system plays an important role by providing equipment;
vehicles etc. on hire purchase without making full payments. NSIC also provides
machinery and equipment to Small Scale units on hire purchase basis and on lease
basis. Factoring the other financial service under which a financial institution
undertakes the task of collecting the book debts of it client.
15.13 GLOSSARY
Capital lease: It is a lease obligation that has to be capitalized on the balance sheet. It
is characterized by: it is non-cancelable; the life of lease is less than the life of the
asset(s) being leased; and, the lessor does not pay for the upkeep, maintenance, or
servicing costs of the asset(s) during the lease period.
Sub-lease: A transaction in which leased property is released by the original lessee to
a third party, and the lease agreement between the two original parties remains in
effect.
Wet lease: A wet lease is any leasing arrangement whereby a company agrees to
provide an aircraft and at least one pilot to another company. ‘Dry lease’ on the other
hand, refers to leasing only the aircraft.
15.14 SELF ASSESSMENT QUESTIONS
1) Explain the term Leasing. State the various types of lease agreements.
2) What are the advantages of Leasing?
3) What is the hire purchase financing? How does it differ from the lease?
financing?
4) Write a short note on Factoring
.
15.15 FURTHER READINGS
1. Ghosh P.K. and Gupta G.S., Fundamentals of Leasing and Lease Financing,
Vision Book Pvt. Ltd., New Delhi 1985.
2. Monga J.R., Financial Accounting: Concept & Applications, Mayur Paperbacks,
19th Edition.
3. Pandey I.M., Financial Management, Vikas Publishing House Pvt. Ltd. 8th
Edition.
ARTICLES
Agrawal N.K. & P.L. Joshi, “Accounting for Leases”, the Chartered Accountant Aug.,
1983, page 92-97.
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11. Ghosh T.P., “Leasing: A financing decision”, the Chartered Accountant, June 1987,
page 996-967.
Mukhopadhyay D., “Lease Financing- An Overview”, the Management Accountant,
May 1995, page 354-356.
Ramanujam K.M., R. Thennsyhi, “Accounting for Leases”, the Management
Accountant, Nov., 1995, page 850-852.
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