Question Description
Initial question:
In your firm, what benefits does leasing offer, compared to the purchase of an asset? Provide examples.
Respond to this:
I work for a medical device company so most of the equipment that we buy are custom made and owned by the company. Recenelty we have invested a lot of money in expansion for one of our product lines. This was the biggest investment to date by the company. From time to time we get equipment on lease such as laser machines or R&D testing machines. This is advantages to the company as this as highly expensive machine and only needed for short term for testing. So buying them would not be a good decision as we would not use them after testing phase. This machines have high depreciation cost and will create no value for it to be purchased.
The decision to lease or buy equipment depends upon the cost and how long we will use this equipment for. Also, how much funds are allocated to buy or lease this equipment and what value will this add to the organization before making any purchase decision.
Brigham, E. F., & Gerhardt, M. C. (2017). Financial management: Theory and practice (14th ed.). Boston (MA): Cengage Learning.
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