When capital is conserved by leasing equipment, it can be put to more profitable company uses (increasing inventories, expanding sales, etc.). The average return on capital for business is 18% AFTER taxes.
A lease is not a loan. Borrowing reduces lines of credit. Leasing is thus a NEW credit source, which allows increased borrowing capacity.
Leases may sometimes be treated as off balance sheet debt which can enhance financial ratios & borrowing capacity.
Structured leases can allow upgrade and trade-up options insuring the latest technology.
Lease payments can sometimes be treated as a direct expense, which allows the equipment to be paid for with pre-tax dollars. Where as bank financing only allow expensing the interest costs & depreciation.
Lease payments can sometimes be treated as a direct expense, which allows the equipment to be paid for with pre-tax dollars. Where as bank financing only allow expensing the interest costs & depreciation.
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