| Alternative
profitability |
the
profitability obtained from investment projects
with similar risk and return |
| Back
lease |
the
essence of the lease operation is that the
owner of the asset (usually used equipment)
sells it to the lessor, who lets it out
on lease |
| Buy
back option |
the
buy back option includes the right of the
lessee to buy the object of the lease bargain,
as well as the right of the lessor to demand
from the lessee to buy it |
| Capital
budgeting |
managing
the investment process in compliance with
financing decisions |
| Captive |
subordinate
lease company, formed by producers of assets
which are objects of lease operations |
| Cash
flow |
each
directed capital movement; the positive
cash flows are inflows, and the negative
are outflows |
| Direct
lease |
a
lease in which the lessee obtains from the
lessor the right to use an asset, which
he did not possess before |
| Discount
Rate |
a
rate, which is used in determining the present
value of future cash flows |
| Export
lease |
transaction
between three parties in which the lessor
buys property from a producer from his own
country and delivers it to a lessee from
another country |
| Financial
lease |
a
lease contract, which “basically transfers
all the risks and benefits related to the
ownership of the asset” to the lessee |
| General
– irrevocable lease term |
a
term, which covers about 75% of the estimated
useful life of the asset. During this period
the sides do not have the right to terminate
the contract, except for reasons explicitly
stated in the contract |
| Hire
purchase |
a
rent contract with an option for purchase
at the end of the lease period |
| Interest
rate in the lease contract |
the
discount rate, which, when applied in the
beginning of the lease, determines the total
amount of the minimal lease installments
from the lessor’s point of view |
| Intermediaries
in the lease transaction |
parties
in the lease transaction which cooperate
in accomplishing the transaction during
the different stages |
| Internal
rate of return |
one
of the modern methods of capital budgeting,
which gives an account of the time value
of money |
| Lease |
contract
according to which one of the parties, the
owner of a given fixed asset, called lessor,
grants the use of that asset to a second
party, called lessee, in exchange for specified
payments during a predetermined period.
After the end of that period, the lessee
may also become the owner of the property
which is an object of the lease transaction |
| Lease
installments |
payments
which the lessee is obliged or can be forced
to make during the term of the lease contract |
| Lease
scheme |
the
general parameters of the lease – installment
amounts, number, frequency and time of payment,
interest rate, basic calculated price, extra
costs paid by the lessor |
| Lessee |
the
party to the lease which gets the right
to use the leased asset for a specified
period and through periodic installments |
| Lessor |
the
owner of the asset and party to the lease
which grants to the lessee the right to
use that asset for a specified period and
through periodic installments |
| Leveraged
lease |
a
lease whereby the lessor gives the asset
to the lessee, but uses credit from a third
party to purchase the asset from the producer |
| Mathematical
model |
an
abstract model of real objects reflecting
their most significant features from the
observer’s point of view, constructed with
the help of mathematical methods. The model
is an artificial, expedient, simple system,
which allows the observer examining the
model to come to conclusions on the real
system. Usage of the model in many cases
produces information, which normally cannot
be obtained through direct examination of
the real object |
| Minimum
required return |
the
lower limit of profitability, which the
investor wants to оobtain |
| Net
lease |
a
lease transaction whereby the lessee assumes
all the risks and obligations related to
the ownership and exploitation of the property
– maintenance, repairs, insurance, training
the staff, materials supply, management
of the production process |
| Net
expenditures of the lessor |
all
expenditures minus eventual positive effects
of the lease for the lessor |
| Net
present value |
one
of the modern methods of capital budgeting,
accounting for the value of money in time |
| Off
-balance sheet asset reporting |
recording
the asset in off-balance sheet accounts.
In operating lease, the lessee reports the
asset in an off-balance sheet account, because
it is treated as an outside one |
| Operating
(exploitation) lease |
a
lease which does not fit in the financial
lease conditions. The operating lease is
applied for specialized equipment which
depreciates quickly and has well-developed
secondary market. The lease installments
cover only partially the lessor’s expenses,
so when the lease term expires, the asset
is usually sold or let out on lease again
|
| Residual
(liquidation) value |
the
estimated selling price of the asset at
the end of the specified term for its practical
use in the company, after costs associated
with liquidation. When the residual value
is up to 5% of the asset’s reported value,
we do not take it into account in determining
the depreciation amount |
| Supplier’s
lease |
a
lease whereby the producer sells the property
to a leasing company and receives the payment
at once. At the same time, the producer
rents the same asset and lets it out by
sub-lease to a final lessee. The general
point of that kind of lease operation is
realization of sales of equipment on markets
with low purchasing power |
| Tax
effect |
shows
the impact of income tax on lease evaluation.
It is calculated by multiplying the tax
rate by the cash flow, which increases or
decreases taxable profit |
| Term
of the lease contract |
the
irrevocable term for which the lessee has
signed a contract to use the asset, together
with all further periods for which the lessee
will have the right to choose whether to
continue renting the asset in exchange for
payment or free of charge, if at the start
of the lease there is a great certainty
that the lessor will exercise his right
to choose |
| Transit
lease |
a
lease in which the lessor, the lessee and
the supplier of the object of the lease
contract are from three different countries |
| Useful
life of the asset |
the
estimated term for practical use of the
asset in the company |
| Wet
lease |
a
lease transaction whereby the lessor pays
the additional costs for maintenance, repairs,
insurance, training of the staff |
