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It is better to lease an asset for better cash flow management. Can anyone please explain Why?
Purchasing the asset would incur one off costs , this will have a significant change in the cash , depending on the value of the asset purchased.
Most assets that can be leased are usually expensive, Eg: land , equipment etc.
It would be better to lease them by paying small amounts over the period of use rather than paying the whole cost at once.This will help retain cash in the company.Thanks @shreyapanicker
Mid-year entry into a lease
Shaeen Ltd entered into an agreement to lease an item of plant on 1 October 20X8. The lease required four annual payments of $200,000 each, commencing on 1 October 20X8. The plant has a useful life of four years and is to be scrapped at the end of this period. The present value
of the lease payments is $700,000. The implicit interest rate within the lease is 10%.Can anyone please help me performing lease amortization schedule for this problem?
Thanks.
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