Advantages vs Disadvantages (1 Viewer)

[karmachameleon]

ARRRRGGHHHHHH

I need help with the advantages and disadvantages of leasing and purchasing a motor vehicle!!!

 

[zingerburger]

Advantages of leasing:

- There isn't a large outlay of cash in one lump sum.
- Motor vehicle can easily be upgraded (to a newer model) if need be.

Disadvantages of leasing:

- Ongoing regular payments can drain financial resources.
- More expensive over the long term.

Advantages of purchasing:

- No regular repayments needed.
- Cheaper over the long term.

Disadvantages of purchasing:

- Large outlay of cash.

That's all I can think of. Hope it helps.

 

[kesh1]

Also, by leasing the advantage is :
No costs associated with maintainance however this only applies for operating leases.
Operating leases are held shorter than the assets life, and can be cancelled without penalty.

 

[samwell]

Also, by leasing the advantage is :
No costs associated with maintainance however this only applies for operating leases.
Operating leases are held shorter than the assets life, and can be cancelled without penalty.

plus: leasing is a tax effective way of obtaining non current assets as it is tax deductible and leasing spreads the impact on the budget and thw working capital instead of a large outlay of cash.
It also means that the business does not have to endure debt financingor costs from equity financing to gain a large amount of cash and meet its short term obligations(liquidity)
advantages of purchasing
The business does not have a long term financial obligation like with leasing and the business gains ownership of a non current asset which can be used in the long term to add to assets thus can improve the business' liquidity in the long term.

 

[kesh1]

This is for global not finance...
but for this question :
Describe the specific financial influences which could affect this new global business, and assess the BS ability to manage risk involved.

The case study
"Ozyachters well established Aus manufacturer of yachts, has bought its main customer Yachtshop USA, by borrowing American dollars from US bank due to variable interest rate lower than Aus.

For influences it's currency fluct, interest rates and overseas borrowing.
But for the assess part...
How is the variable interest rate risk managed in terms of hedging?

 

[samwell]

specific financial influences are:
(1) Interest rates: The highly variable interest rates fluctuate to affect the business debt obligations.
(2) Solvency: borrowing from an overseas company will infulence a businesses overall debt. The long terms stability of the business is influenced by the wit of the borrowing
(3) Exchange rate: The exchange rate will influence the amount the business will have to pay to the US bank from australian dollars.
Risks:
(1) The business can use derivatives and hedging to minimise the interest rate and exchange rate risks involved in the business transaction. the business has the ability to minimise or eliminate risks from the business transaction
(2)The business can also be at risk in how it is going to pay the debt. The method of paying off the transaction can place the business at significant risk provided that global contract laws are still ambigous. The business can engage in documentary collection payment to reduce its risk.
(3)Risk of liquidation: any form of debt leaves the business at a significant risk of liquidation. The business should assess the economic conditions of both the australian and the Us economy to c if it is at any risk of liquidation. Assessing its financial info may significantly reduce the risk the business is at.
hope that helps lol

 

[kesh1]

Thank you.