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  • Prepared By: Prem Retoliya

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    abhi456
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    This document discusses the differences between owning and leasing assets. It outlines that when owning assets, the owner takes on the risks of obsolescence but can claim depreciation deductions. Leasing involves paying periodic fees to use an asset without owning title. The document also describes the types of leases as operating or financial and long or short term. When deciding whether to own or lease, factors to consider include taxes, residual value, cash position, obsolescence, and depreciation. It provides processes to calculate the present value of cash outflows for both owning with borrowing and leasing an asset.

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    This document discusses the differences between owning and leasing assets. It outlines that when owning assets, the owner takes on the risks of obsolescence but can claim depreciation deductions. Leasing involves paying periodic fees to use an asset without owning title. The document also describes the types of leases as operating or financial and long or short term. When deciding whether to own or lease, factors to consider include taxes, residual value, cash position, obsolescence, and depreciation. It provides processes to calculate the present value of cash outflows for both owning with borrowing and leasing an asset.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    1 views7 pages

    Prepared By: Prem Retoliya

    Uploaded by

    abhi456
    This document discusses the differences between owning and leasing assets. It outlines that when owning assets, the owner takes on the risks of obsolescence but can claim depreciation deductions. Leasing involves paying periodic fees to use an asset without owning title. The document also describes the types of leases as operating or financial and long or short term. When deciding whether to own or lease, factors to consider include taxes, residual value, cash position, obsolescence, and depreciation. It provides processes to calculate the present value of cash outflows for both owning with borrowing and leasing an asset.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 7

    Prepared by: Prem Retoliya

    OWING OR PURCHASE OF ASSETS


    Sources of Owing the assets:

    Owned capital i.e. preference or equity capital. Borrowing capital i.e. Loan , Issuing Debenture.

    Effect of buying assets


    ownership lies with buyer Pay purchase price Risk of obsolesce Claim depreciation deduction

    Meaning of lease :
    Lease is agreement that provides a person to use and control over asset, for price payable periodically, without having title of asset. The owner is called lesser and the user is called lessee . Sources of lease financing: share capital Debentures Public deposits Term loans from bank or financial institutions

    Types of Lease
    Operating lease
    Short term contract

    Financial lease
    Long term contract

    Factors affecting lease or buy decision


    Consider profit tax

    Residual value

    Cash position

    Obsolesce

    Depreciatio n

    Process to calculate p.v. of cash outflow In case owing the assets with borrowing
    Calculate Cash outflow i.e. loan repayment + interest on loan. Tax saving on depreciation and interest . Calculate post tax cash outflow and multiply with P.V. factor.

    In case asset to be taken on lease :


    Calculate cash outflow i.e. lease rental + other charges Tax saving on lease rent Calculate post tax cash outflow and multiply with P.V. factors

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