FS - Financial Services Session 1 FS constitute an imp...

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Financial Services Session 1 FS constitute an imp component of the financial system. Functioning of the Fin. sys is facilitated through elements of fin services.
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Financial services Asset/fund Based Services Fee based services Leasing Merchant Banking Hire Purchase & Consumer Credit Stock broking Factoring &Forfaiting Credit Rating Services Bill Discounting Insurance Housing Finance
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Lease An agreement in which one party gains a long-term rental agreement, and the other party receives a form of secured long-term debt. The lessee gains a long- term contract for the use of an asset, and the lessor is assured of regular payments for a specified number of years.
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MEANING AND CONCEPT OF LEASING Lease is defined by the international accounting standard as an agreement whereby the lessor conveys to the lessee in return for rent the right to use an agreed period of time. According to jack broyles, lease is the method of acquiring the right to use equipment of real property for consideration.
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“A lease is classified as a financial lease if it secures for the lessor the recovery of his capital outlay plus a return on the funds invested during the lease term’. ‘A lease is an operating lease’, according to the said guidance note of ICAI, ‘if it does not secure for the lessor the recovery of his capital outlay plus a return on the funds invested during the lease term’. Financial Lease & Operating Lease
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WHY LEASING? Acquisition of new plants and equipments are often required by business organizations. While it is necessary to see the profitability in investing on new equipment, one must equally be aware of the necessary to conserve cash resources to maintain liquidity, under such circumstance leasing arrangements may come in handy for various reasons.
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TYPES OF LEASE, DOCUMENTATION AND LEGAL ASPECTS OPERATING LEASE: In operating lease, the lease is usually for a shorter term and is generally cancelable. As the asset is leasable repeatedly to several person, the operating lease is usually said to be a nonpayout lease. SERVICE LEASE : It is an equipment leasing under which the lessor provides financing as well as servicing of the assets during the lease period. The lessor will covenant with the lessee to provide maintenance and servicing of the leased asset during the existence of the lease. FINANCIAL LEASE: Financial lease is a long term lease usually coinciding with the economic life of the asset and is noncancellable. It operates as a long term debt financing and is usually full-payout as, in contrast to operating lease, it is usually a single lease repaying the cost of the asset. They play a major role in financing of building of buildings and equipments to industries.
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FINANCIAL LEASE OPERATING LEASE The leased asset is use-specific. Usually the lessor buys the asset identified by the lessee and leases out to him.
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