ABSTRACT
This chapter explores how leasing can be used to increase return on investment by freeing up capital to be used for investment opportunities. Leasing has become a major vehicle for acquiring the use of an asset. Because leasing involves the acquisition of an asset and creates certain cash flows over an extended period of time, it is possible to use capital investment techniques to evaluate which is the better decision—lease or purchase. The method that appears to be most appropriate is the net present value method. The Financial and Accounting Standards Board established guidelines for defining whether, under certain criteria, a lease can be classified as a capital lease. Based on the above advantages, it is easy to see why leasing has become so popular as a vehicle for acquiring assets. Lessor arranges financing for the asset and pays the vendor for the asset. The asset is then delivered to the lessor or someone else whom the lessor designates.
