In your firm, what benefits does leasing offer, compared to the purchase of an asset? Provide examples.
There are many benefits leasing provides to a business. Some include, but are not limited to fix rate financing, possible tax write-offs (depending on how the lease was structured), financial loan ease, the lessee’s option to purchase the used equipment at the end of the lease, and less upfront cash outlay.
An example within my facility is our pyxis system which is located on every unit. This system stores supplies that may be needed on the floor for the patients. It is utilized by finding your patient in the system, picking the product needed, and charging it by pushing remove from the area the product is located within the system. We also have core pyxis stations on every floor that have certain items that are not housed in the pyxis stations on the units. These pyxis stations are leased and the hospital pays a quarterly bill for this equipment. Leasing is most definitely better for the facility because these are very large, expensive, up-to-date pieces of equipment that are located throughout the facility that require maintenance, updates, and consistent loading on a regular basis. By leasing and not purchasing, the company is not stuck with antiquated equipment, unfixable equipment can be replaced, updates are free, overhead cost (when considering up keep) is cheaper, inventory is better maintained, and the hospital is not stuck with oversized broken equipment which would have been the case if it were purchased. More so, leasing doesn’t require restriction on the financial operations of my facility; however, the loans I’m sure my facility takes out can often put restrictions on the financial operations of the company.
Brigham, E. F., & Ehrhardt, M. C. (2017). Financial management: Theory and practice [with MindTap] (15th ed.). Mason, OH