1 a direct lease results when a lessor owns or

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Unformatted text preview: ame asset, making fixed periodic payments for its use. 1. A direct lease results when a lessor owns or acquires the assets that are leased to a given lessee. In other words, the lessee did not previously own the assets that it is leasing. 2. In a sale–leaseback arrangement, lessors acquire leased assets by purchasing assets already owned by the lessee and leasing them back. This technique is normally initiated by a firm that needs funds for operations. By selling an existing asset to a lessor and then leasing it back, the lessee receives cash for the asset immediately, while obligating itself to make fixed periodic payments for use of the leased asset. 676 PART 6 Special Topics in Managerial Finance leveraged lease A lease under which the lessor acts as an equity participant, supplying only about 20 percent of the cost of the asset, while a lender supplies the balance. maintenance clauses Provisions normally included in an operating lease that require the lessor to maintain the assets and to make insurance and tax payments. renewal options Provisions especially common in operating leases that grant the lessee the right...
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