12 finance_other_external_finance

12 finance_other_external_finance - tutor2u GCSE Business...

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tutor2u GCSE Business Studies Other Sources of External Finance Leasing Leasing is like renting a piece of equipment or machinery. The business pays a regular amount for a period of time, but the item belongs to the leasing company. Most company cars are leased to businesses. The business pays a monthly fee for the car and at the end of the period (normally about two years), the business swaps the car for a newer model. The advantages of leasing are: R Cheaper in the short run than buying a piece of equipment outright. R If technology is changing quickly or equipment wears out quickly it can be regularly updated or replaced. R Cash flow management easier because of regular payments. The disadvantages of leasing are: Q More expensive in the long run, because the leasing company charges fees which make the total cost greater than the original cost. Hire Purchase Business hires the equipment for a period of time making fixed regular payments. Once payments have finished it then owns the piece of equipment. Hire purchase is different to leasing in that the business
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