Topic_15_E1 - equipment needed On a whim the CFO filled out...

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Topic 15, Exercise 1 Leasing in the E-commerce World The article, “Equipment Leasing: New Life on Lease,” discusses changes in the leasing market associated with the development of E-commerce. Examples show how companies can use operating leases to improve performance and how the use of the Internet can reduce the costs of securing such financing. After reading the article, answer the following questions: 1. What were the advantages sited by Horizon Foods for securing operating leases on the Internet? The CFO of Horizon explained that the company was under a capital constraint. The company was formed through acquisitions and mergers and it had to use a “fair” amount of leverage in acquisitions. The firm was growing rapidly and needed expansion financing in a variety of asset areas and the assets had widely varying asset lives. The CFO believed that it would be difficult to find operating leases for the variety of
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Unformatted text preview: equipment needed. On a whim, the CFO filled out an online request from Capital.com. The Company was able to quickly and efficiently broker the requests to various financial firms and was able to quickly arrange the leasing. 2. Describe how Smith International uses the web to secure operating lease financing. Smith International, Inc. supplies equipment to firms in the oil and gas industry. It leases substantial amounts of equipment, with approximately $115 million in noncancelable outstanding operating leases. It uses the Internet to acquire the operating leases efficiently. The use of the Internet allows Smith International to bundle lease requests into packages worth at least $500,000. It auctions the packages to the highest bidder. The advantages to the company include lower transaction costs, greater efficiency and competitive pricing....
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