why do companies go for leasing of assets explain
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Explanation:
Better Usage of Capital
Better Usage of CapitalGiven that a company chooses to lease over investing in an asset by purchasing, it releases capital for the business to fund its other capital needs or to save money for a better capital investment decision.
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Answer:
Companies often choose to lease assets instead of purchasing them outright for a variety of reasons, including, Lowering initial costs, Tax benefits, flexibility, Reduced risk, etc.
Explanation:
- Lower initial costs: Leasing asset allows companies to use assets without having to pay the full cost of purchasing them upfront. This can be especially beneficial for businesses that have limited cash flow or need to conserve capital for other expenses.
- Tax benefits: Lease payments are often tax-deductible, which can lower a company's overall tax liability. Additionally, leasing can help businesses avoid some of the tax implications that come with owning assets, such as depreciation.
- Flexibility: Leasing can provide businesses with greater flexibility than owning assets outright. For example, leases can often be structured with variable payment terms or the option to upgrade to newer equipment after a certain period of time.
- Reduced risk: Leasing can help companies mitigate risk by shifting some of the responsibility for maintenance, repairs, and replacement onto the lessor.
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