Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

respond to: In our firm, leasing offers several benefits compared to the purchase of an asset: 1 . Lower initial costs: Leasing allows our firm

respond to: In our firm, leasing offers several benefits compared to the purchase of an asset:
1. Lower initial costs: Leasing allows our firm to acquire the necessary equipment or machinery without a large upfront investment. This is beneficial for preserving cash flow and working capital for other business needs.
2. Flexibility and scalability: Leasing provides our firm with the flexibility to upgrade or change equipment as needed without being tied down to a specific asset. This is particularly useful in industries where technology and equipment quickly become outdated.
3. Maintenance and support: Many lease agreements include maintenance and support services, which can help reduce the burden on our firm's resources and ensure that the equipment is properly maintained and functioning optimally.
4. Tax benefits: Lease payments are often tax-deductible as an operating expense, providing potential tax benefits for our firm compared to the depreciation of purchased assets.
5. Risk mitigation: Leasing helps our firm mitigate risks associated with ownership, such as depreciation, obsolescence, and resale value. This allows us to focus on our core business activities without worrying about the long-term value of the asset.
Example: Instead of purchasing a fleet of vehicles for our delivery services, our firm leases the vehicles from a leasing company. This allows us to access the vehicles we need without a large capital outlay, and we can easily upgrade or add more vehicles as our business grows. The lease agreement also includes maintenance services, ensuring that our vehicles are well-maintained and reliable for our delivery operations.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Income Tax Fundamentals 2013

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill

31st Edition

1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516

More Books

Students also viewed these Finance questions