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Financial Terms | |
Leasing |
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Definition of LeasingLeasingContract granting use of real estate, equipment, or other fixed assets for a specified time in exchange for payment, usually in the form of rent. The owner of the leased property is called the lessor, the user the lessee.
Related Terms:Net advantage to leasingThe net present value of entering into a lease financing arrangement rather than Debt displacementThe amount of borrowing that leasing displaces. Firms that do a lot of leasing will be Lender (Credit Insurance)Individual or firm that extends money to a borrower with the expectation of being repaid, usually with interest. Lenders create debt in the form of loans. Lenders include financial institutions, leasing companies government lending agencies and automobile dealers. Living BenefitSome insurance companies include this benefit option at no cost to their policy holders. The insurer considers on a case to case basis, the need for insurance funds before death. If the insured can demonstrate a shortened life of less than two years and with some insurers one year, the insurer will consider releasing up to 50% or a maximum of $100,000 of the life insurance coverage held by the insured. Not all insurers offer this benefit for free. The need has resulted in specific stand alone living benefit/critical illness policies coming into existence. Look under "Different types of Life Insurance" for further information. You might have heard of "Viatical Settlements", the practice of seriously ill people selling the rights to their life insurance policies to third parties. This practice is common in the United States but has not caught on in Canada. Sales-type leaseAn arrangement whereby a firm leases its own equipment, such as IBM leasing its own Absolute AdvantageThe ability to produce a good or service with fewer resources than competitors. See also comparative advantage. Allowance for bad debtsAn offset to the accounts receivable balance, against which ![]() approximated net realizable value at split-off allocationa method of allocating joint cost to joint products using a Bad debtAn account receivable that cannot be collected. Bad debtsThe amount of accounts receivable that is not expected to be collected. bad debtsRefers to accounts receivable from credit sales to customers Comparative AdvantageA country has a comparative advantage over another country in the production of good A if to produce a unit of A it forgoes more of the production of good B than would the other country when it produces a unit of good A. Its efficiency in the production of good A relative to its efficiency in the production of good B is greater than is the case for the other country. See also absolute advantage. Competitive AdvantageThe strategies, skills, knowledge, resources or competencies that differentiate a business from its competitors. Cost of DebtThe cost of debt (bonds, loans, etc.) that a company is charged for DebtMoney borrowed. DebtBorrowings from financiers. ![]() DebtFunds owed to another entity. Debt capacityAbility to borrow. The amount a firm can borrow up to the point where the firm value no Debt CapacityAn assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources. Debt (Credit Insurance)Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. debt may or may not be secured. Debt/equity ratioIndicator of financial leverage. Compares assets provided by creditors to assets provided Debt/Equity RatioA comparison of debt to equity in a company's capital structure. Debt FinancingRaising loan capital through the creation of debt by issuing a form of paper evidencing amounts owed and payable on specified dates or on demand. Debt instrumentAn asset requiring fixed dollar payments, such as a government or corporate bond. Debt InstrumentAny financial asset corresponding to a debt, such as a bond or a treasury bill. Debt leverageThe amplification of the return earned on equity when an investment or firm is financed Debt limitationA bond covenant that restricts in some way the firm's ability to incur additional indebtedness. Debt marketThe market for trading debt instruments. Debt ratioTotal debt divided by total assets. Debt RatioThe percentage of debt that is used in the total capitalization of a Debt reliefReducing the principal and/or interest payments on LDC loans. Debt securitiesIOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and Debt SecurityA security representing a debt relationship with an enterprise, including a government Debt serviceInterest payment plus repayments of principal to creditors, that is, retirement of debt. Debt-service coverage ratioEarnings before interest and income taxes plus one-third rental charges, divided Debt service parity approachAn analysis wherein the alternatives under consideration will provide the firm Debt swapA set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank debt-to-equity ratioA widely used financial statement ratio to assess the Debtor in possessionA firm that is continuing to operate under Chapter 11 bankruptcy process. Debtor-in-possession financingNew debt obtained by a firm during the Chapter 11 bankruptcy process. DebtorsSales to customers who have bought goods or services on credit but who have not yet paid their debt. European Monetary System (EMS)An exchange arrangement formed in 1979 that involves the currencies Exposure nettingOffsetting exposures in one currency with exposures in the same or another currency, Firm's net value of debtTotal firm value minus total firm debt. Funded debtdebt maturing after more than one year. funded debtdebt with more than 1 year remaining to maturity. Interest rate on debtThe firm's cost of debt capital. International Monetary FundAn organization founded in 1944 to oversee exchange arrangements of International Monetary Fund (IMF)Organization originally established to manage the postwar fixed exchange rate system. International Monetary Market (IMM)A division of the CME established in 1972 for trading financial Internet business modela model that involves intraneta mechanism for sharing information and delivering data from corporate databases to the local-area network (LAN) desktops Junior debt (subordinate debt)debt whose holders have a claim on the firm's assets only after senior Long-term debtAn obligation having a maturity of more than one year from the date it was issued. Also Long-term debtA debt for which payments will be required for a period of more than Long Term DebtLiability due in a year or more. Long-term debt/capitalizationIndicator of financial leverage. Shows long-term debt as a proportion of the Long-term debt ratioThe ratio of long-term debt to total capitalization. Long-term debt to equity ratioA capitalization ratio comparing long-term debt to shareholders' equity. Mezzanine DebtRefers to non-conventional debt that has a greater element of risk than secured debt but has less risk than equity. MM's proposition I (debt irrelevance proposition)The value of a firm is unaffected by its capital structure. MonetarismSchool of economic thought stressing the importance of the money supply in the economy. Adherents believe that the economy is inherently stable, so that policy is best undertaken through adoption of a policy rule. Monetarist RuleProposal that the money supply be increased at a steady rate equal approximately to the real rate of growth of the economy. Contrast with discretionary policy. Monetary AggregateAny measure of the economy's money supply. Monetary BaseSee money base. Monetary goldGold held by governmental authorities as a financial asset. Monetary / non-monetary methodUnder this translation method, monetary items (e.g. cash, accounts Monetary policyActions taken by the Board of Governors of the Federal Reserve System to influence the Monetary PolicyActions taken by the central bank to change the supply of money and the interest rate and thereby affect economic activity. Monetizing the DebtSee printing money. National DebtThe debt owed by the government as a result of earlier borrowing to finance budget deficits. That part of the debt not held by the central bank is the publically held national debt. Net adjusted present valueThe adjusted present value minus the initial cost of an investment. Net advantage of refundingThe net present value of the savings from a refunding. Net advantage to mergingThe difference in total post- and pre-merger market value minus the cost of the merger. net asset valueThe value of all the holdings of a mutual fund, less the fund's liabilities. Net asset value (NAV)The value of a fund's investments. For a mutual fund, the net asset value per share Net assetsThe difference between total assets on the one hand and current liabilities and noncapitalized longterm Net benefit to leverage factorA linear approximation of a factor, T*, that enables one to operationalize the Net book valueThe current book value of an asset or liability; that is, its original book value net of any Net Cash after OperationsCash flow available for debt service—the payment of interest and principal on loans. Generally calculated as cash provided by operating activities before interest Net cash balanceBeginning cash balance plus cash receipts minus cash disbursements. Net changeThis is the difference between a day's last trade and the previous day's last trade. net cost of normal spoilagethe cost of spoiled work less the estimated disposal value of that work Net Domestic ProductGDP minus depreciation. Net errors and omissionsIn balance of payments accounting, net errors and omissions record the statistical Net ExportsExports minus imports. Net financing costAlso called the cost of carry or, simply, carry, the difference between the cost of financing Net floatSum of disbursement float and collection float. net floatDifference between payment float and availability float. Net incomeThe company's total earnings, reflecting revenues adjusted for costs of doing business, NET INCOMEThe profit a company makes after cost of goods sold, expenses, and taxes are subtracted from net sales. Net incomeThe last line of the Income Statement; it represents the amount that the company earned during a specified period. Net incomeThe excess of revenues over expenses, including the impact of income taxes. net income (also called the bottom line, earnings, net earnings, and netoperating earnings) Net inventoryThe current inventory balance, less allocated or reserved items. Net investmentGross, or total, investment minus depreciation. Net InvestmentInvestment spending minus depreciation. Net leaseA lease arrangement under which the lessee is responsible for all property taxes, maintenance Net National ProductGNP minus depreciation. Net operating lossesLosses that a firm can take advantage of to reduce taxes. Net operating marginThe ratio of net operating income to net sales. Net PayThe amount of an employee’s wages payable after all tax and other deductions have been removed. Net periodThe period of time between the end of the discount period and the date payment is due. 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