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Essay / Research Paper Abstract
The decision to buy or lease is faced by many businesses. This 4 page paper considers the purchase or lease of a large piece of equipment and considers the advantages and disadvantages of each option. The bibliography cites 3 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEbuylea.rtf
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Unformatted sample text from the term paper:
effective and the net present value may be the lowest, but loans can also have the greatest flexibility. Where there is the purchase of equipment that can be used for
its useful life, which is not going to become obsolete then the risks of ownership may be less and the benefits may be greater due to flexibility and ownership of
title. With the purchase of the equipment there is the creation of an asset, the value is then depreciated over the life of the asset, usually depreciation with
take place in line with the IRS or tax office guidelines as this will simplify accounts, but there is not rule that financial and tax accounts need to be the
same. The aim of depreciation to match the use of the equipment against the value it creates under the matching convention. The maintenance of the equipment is an operating expense,
but if there are major improvements to the equipment these can also be capitalised. However, with the titles also comes some risk, if there are breakdowns or the equipment becomes
obsolete these are costs that the company will bear (Chadwick, 2001). The option is to lease. Leasing may be see as more cost efficient in the short term as
the cost may be lower, The advantages are that as title does not pass, in most cases the risk is born by the leasing company, who will be responsible if
the equipment breaks down, the lease can be fir shorter periods than the expected life of the machine so obsolescence of the equipment is less of a risk. The title
has not passed so there is no asset created, instead all of the costs of leasing are operating costs and tax is reduced immediately as a result of the accounting
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