A strong credit rating will not be quite as critical for leasing as it would be for buying. This may be a big concern for start-ups and small businesses. · Tax deductions. Your monthly lease payment is tax deductible because it's a business expense. The business can usually deduct the full cost of lease rentals from taxable income · Freedom.
The cost of capital is rate of return required by a capital provider in exchange foregoing an investment in another project, assets or business with similar risk. For that reason, it is also known as an opportunity cost. For investors, the rate return on a security is a benefit of investing. But for financial managers, the same rate of return is a cost of raising fund that is needed to operate the firm. In other words, the cost of raising fund is the firm’s cost of capital.
Should accounting numbers be measured on historical costs or market value? Accounting numbers measured on either historical costs or market value will influence the decision making in management and investment, and lead to the results in economic activity. Standard setters have long debated between historical costs or market value because of the reliability versus relevance issues. From the conservatism and reliability perspective, accounting numbers should be measured on historical costs because the numbers is reasonably free from bias and error. The reason is the information support by independent documentary evidence.
List the advantages and disadvantages of leasing vs. buying. When is one more desirable than the other? Advantages Lower total cost of ownership (TCO): A lease lets the purchaser realize considerable savings compared to an outright purchase or scheduled purchase payments, because the purchaser pays only for the use of the equipment. Leasing also helps reduce the concerns and costs associated with equipment disposal. Reduced risk: At the end of the term, leasing gives the purchaser the option of simply returning the equipment, purchasing it outright or extending the contract.
Relevant financial information contributes to sound business solutions. For example, the predicted future costs and revenues that differ among alternatives are essential to financial decisions. Currently, Guillermo’s patented finishing coating does not have a large market audience as does the flame-retardant coating. Thus the company has determined that it could purchase another finishing product that would add the same amount of value to its custom furniture. This alternative requires consideration of the opportunity cost of eliminating in-house production of the finished coating.
As a result, more organizations might be interested in providing funds (including pension funds) and the interest charge might be lower. Also, this basic financing plan might be supplemented by other sources such as corporate retained earnings or assistance from a local development agency. Lease the building from a third party: In this option, the corporation would contract to lease space in a headquarters building from a developer. This developer would be responsible for obtaining funding and arranging construction. This plan has the advantage of minimizing the amount of funds borrowed by the corporation.
People respond to incentives People face trade offs when a consumer uses resources to purchase a product or service, understanding the resources used can not be used for a different purchase. This will cause the consumer to prioritize purchases, such as to pay the mortgage, before paying for a vacation. The cost of something is what you give up to get it, is when the consumer compares not only the price of a good or service, but if there are any long term cost associated with the expense. A good example of this is a pool, a consumer will compare prices of the pools available and take into consideration the maintenance required to keep the pool, such as chemicals and cleaning. Rational people think in the margins is simply means the purchase of a good is based on the marginal benefit the purchase will have for the person.
Are share repurchases good or bad? The answer, as might be expected, is a bit gray. Assuming the company has a certain amount of cash they wish to return to shareholders, the two ways they can do it are through dividends and share repurchases. Share repurchases are typically more flexible for the company, while dividends are more flexible for the shareholder. The basic answer is that share repurchases are great when the share price is undervalued, and not-so-great when the share price is overvalued.
Furthermore, it is also used later in the acquisition of new business and the retention of the customer. Verizon uses this information to determine the quality of customer, how many lines they qualify for, how much (if any) security deposit is required. Meta data is then collected about their habits; purchases both within and without Verizon, data usage, form of data used, etc. This information is part of the last example in the previous paragraph, customer information. This is the information that is most important to the profitability of the company and therefore needs to be the most secure.
From an accounting prospective, the major problem with the calculations mentioned in the article is determining the rate of return and length of the marketing investment. While the initial value of the “investment”, i.e. marketing expense, can be easily determined, determining the real value after the investment has been made has the potential to be biased without a commonly used measurement. The value of the investment could also fluctuate from year to year based on the companies’ profitability even though marketing had not direct