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Accounting (778)
ACC 333 (82)
Jian Guan (35)
Lecture

leasing.docx

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Department
Accounting
Course
ACC 333
Professor
Jian Guan
Semester
Summer

Description
Certainty One important advantage is that a hire purchase or leasing agreement is a medium term funding facility, which cannot be withdrawn, provided the business makes the payments as they fall due. The uncertainty that may be associated with alternative funding facilities such as overdrafts, which are repayable on demand, is removed. However, it should be borne in mind that both hire purchase and leasing agreements are long term commitments. It may not be possible, or could prove costly, to terminate them early. Budgeting The regular nature of the hire purchase or lease payments (which are also usually of fixed amounts as well) helps a business to forecast cash flow. The business is able to compare the payments with the expected revenue and profits generated by the use of the asset. Fixed Rate Finance In most cases the payments are fixed throughout the hire purchase or lease agreement, so a business will know at the beginning of the agreement what their repayments will be.
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