Leasing

Leasing - INVESTMENT BANKING AND FINANCIAL SERVICES LEASING...

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INVESTMENT BANKING AND FINANCIAL SERVICES LEASING
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LEASING A contractual agreement where the owner (lessor) of an asset transfers the right to use that asset to another person or entity (user/lessee) for an agreed period of time in return for rental. In a Lease transaction asset will not get transferred from the owner to the user Asset will be back with the owner immediately after the period of Lease agreement or the contract may be renewed for some more period
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EQUIPMENT LEASING Our syllabus does not cover the Lease agreements of: 1. Lease agreements to explore for or use of natural resources, such as oil, gas, timber, metals and other mineral rights; 2. Licensing agreements for items such as motion picture films, video recordings, plays, manuscripts, patents and copyrights; and 3. Lease agreements to use lands
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EQUIPMENT LEASING Equipment leasing deals with the assets the companies use – for example plant, Machinery, Aeroplane, etc. Usually lessee will identify the asset that meets lessee’s specific requirements Lessee approaches the leasing company i.e. lessor with all the details like – supplier, price, terms of guarantee and warranty, delivery period, etc. Accordingly, there would a negotiation that culminates into a Lease contract After the agreement, the lessor buys the equipment and delivers it to the lessee
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EQUIPMENT LEASING Risks involved in a Lease transaction: 1. Possibility of losses from idle capacity 2. Technological obsolescence 3. Variations in return due to changing economic conditions Rewards: 1. Profitable operation over the economic life of the asset 2. Gain from appreciation in valuation of residual value
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TYPES OF LEASE Financial Lease Operating Lease Big ticket Lease Cancelable Lease Capital Lease Close ended Lease Open end Lease Cross border Lease Bipartite Lease Tripartite Lease Dry Lease Full pay-out Lease Non-full payout Lease Indexed Lease Percentage Lease Sales type Lease Swap Lease Upgraded Lease
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Finance Lease When the agreement of lease has following features: 1. When the risks and rewards incident to ownership are substantially transferred to lessee 2. Title may or may not eventually be transferred 3. The lease term is for a major part of the useful life of the asset 4. The present value of minimum lease payments is greater than or substantially equal to the fair market value of the asset at the inception of the lease
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Operating Lease It is defined as any lease other than a finance lease When the agreement of lease has following features: 1. The lease term is significantly less than the economical life of the equipment 2. The lessee enjoys the right to terminate the lease at
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This note was uploaded on 01/28/2011 for the course FIN 315 taught by Professor Welker during the Spring '09 term at IUP.

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Leasing - INVESTMENT BANKING AND FINANCIAL SERVICES LEASING...

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