Comparing and Contrast Lease Verses Purchase

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Comparing and Contrasting Lease verses Purchase Options
Bridgette Chambers
ACC/400 Accounting for Decision Making
November 20, 2013
Frederick Thull

Comparing and Contrasting Lease verses Purchase Options
In order for one to explain the difference between leases verses purchase option one would need to explain both options. One would explain what is debt financing, and provide two examples. Also, one would need to explain what equity financing is as well as giving two examples and last which alternative capital structure is more advantageous and why.
If one decided that they do not wanted to take on investors and wanted total control of the business yourself, one may want to pursue debt financing in order to start up a business. One would tap your own sources of funds first by using personal loans, home equity, and even credit cards. A business loan is another option. Debt financing is when a company borrows money that must be repaid but with interest. This will not affect the ownership of the company. Two examples of such would be Issued Bonds and Line of credit. With a line of credit, this is a bank loan where a business can draw out funds whenever money is needed. In Issue Bonds the business can issue bonds as for of debt financing these bonds are marketable securities. Debt financing allows one to have control of your own destiny regarding the business. If you finance your business using debt, the interest you repay on your loan is tax-deductible. This means that it shields part of your business income from taxes and lowers your tax liability every year. That is some of the advantages. The disadvantages of borrowing money are you may have large loan payments at precisely the time you need funds for start-up costs. If one does not make payments to credit cards or commercial banks, you can ruin our credit rating and make borrowing in the future difficult…...

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