Abstract
Businesses have a large number of options available with regards to the investment and financing of fixed assets. These assets could be purchased outright, hired, rented or leased. Because the accounting treatment differs substantially, so some time business prefers one financing option over others. As leases come in many sizes, shapes, and forms, but four types of leasing transactions are made i.e. service lease, financial lease, sale and lease back, and averaged lease. The focus of this study is to find out the factors due to which low profit companies prefer lease financing over loan. The major dimensions are tax benefit, rental payments, no requirement of collateral and simple documentation. One important point is that leasing is done at some fixed rate of interest. It allows a business to better predict its future cash flows. But in case of bank financing (credit) a floating rate is kept, which makes business volatile to market rate variations. We have taken the cross sectional data of 30 companies and have analyzed it through multiple linear regression.
Dr. Cdr (R) Aurangzeb, , Muhammad Shujaat Mubarik. (2010) Do Low Profit Companies Prefer Lease over Loan because of Taxes?, Journal of Managerial Sciences, Volume 6, Issue 1.
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