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A lease is a long-term agreement for the use of an asset. It provides an alternative to direct ownership. During the lease term, the Rental equipment San Francisco Company (lessor) always owns the equipment and the user (lessee) pays the owner to use the equipment. The lessor must retain ownership rights for the contract to be considered a true lease by the Internal Revenue Service. The lessor will receive lease payments in return for providing the machine. The lease payments do not have to be uniform across the lease period. The payments can be structured in the agreement to best fit the situation of the lessee or the lessor. In the lessee’s case, cash flow at the beginning may be low, so the lessee wants payments that are initially low. Because of tax considerations, the lessor may agree to such a payment schedule. Lease contracts are binding legal documents, and most equipment leases are noncancellable by either party. Lease A lease pays for the use of a machine during the most reliable years of a machine's service life. Sometimes the advantage of a lease is that the lessor provides the equipment management and servicing. This frees the contractor from hiring mechanics and service personnel and enables the company to concentrate on the task of building. Long-term, when used in reference to lease agreements, is a period of time that is long relative to the life of the machine in question. An agreement that is for a very short period of time, as measured against the expected machine life, is a rental. A conventional—true—lease will have one of three different end- of-lease options: (1) buy the machine at fair market value, (2) renew the lease, or (3) return the equipment to the leasing company. Rental As in the case of a Rental equipment San Francisco, a lessee loses the tax depreciation shield of machine ownership but gains a tax deduction because lease payments are treated as an expense. The most important factor contributing to a decision to lease is reduced cost. Under specific conditions, the actual cost of a leased machine can be less than the ownership cost of a purchased machine. This is caused by the different tax treatments for owning and leasing an asset. An equipment user must make a careful examination of the cash flows associated with each option to determine which results in the lowest total cost. Working capital is the cash that a firm has available to support its day-to- day operations. This cash asset is necessary to meet the payroll on Friday, to pay the electric bill, and to purchase fuel to keep the machines running. To be a viable business, working capital assets must be greater than the inflow of bills. A machine is an asset to the company, but it is not what the electric company will accept as payment for their bill. The Author is a professional writer, presently writing for tool rental san Francisco
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