1.0 Introduction
1.1 Background of the Study
This is an arrangement between the owner and the user of asset called lesser, and the user of asset called lessee by which rent is paid periodically to the lesser while lessee is molding use of the asset to generate income lesseble asset include:Factory equipment
Plants and machineries
Motor vehicle.
And like contract vary considerable but in case, there will be two rented period an initiated period are terminable when the leasing desires in which rental charging are very low , some leasing agreement include:
Insurance cover.
Maintain of equipment
Breakdown replacement
An option to purchase, the asset at the end of rental period. This last option may not be of interest to the lessee if his object is to have the use of up to date equipment for a short period of time until it become absolute or if the equipment is only needed for part of its potential working life.
The whole cost of leasing is allowed for taxation purpose as a business expense the lessee. As a general rule, leasing will be more expensive than financing and out right purpose by means of a fixed term loan, compared with hire purchase by means of a fix term loan, Leasing agreement has advantage that no asset or liability appears and that high borrowing power, is not affected by this transaction .as s simple example of this suppose company fixed assets appears on the balance sheet at n4 million and it is considered prudent to borrow up to 40% of that value that is N800,000 , if an additional asset costing n4000.000 is obtained on liability under the agreement N320,000 than the new borrowing limited will be reduced to 40% x[N4,00,000,000 N800,000]N1920,000 les the 320,000 outstanding leaving N1,6000,000. Under a leasing contract there would have been no entry on the balancing sheet other than a current liability for arrears of payment under the contact.
1.2 Statement of Problem
Equipment leasing or the procedure of equipment leasing is encountered by numerous problems to the lesson and lessen such as:
a) The individual lessee may abscond with the equipment
b) Bad dept may by default of payment by the lessor
c) This procures ties down the capital of the lessor.
1.3 Objective of the Study
The primary objective of the study is to be academically worthy of the study national diploma certificate. The objective of the can also be extended to knowing the benefit and demerit of equipment at large.
1.4 Research Question
Is equipment leasing not a good source of short —term fund to the organization
Is equipment leasing detrimental to the lessor
What are the challenges facing equipment leasing as a source of bank fund for capital investment
What are the statistical data of the organization from 2005-2011
1.5 Significant of the Study
The primary objective of the study is to know the benefits and demerit of equipment leasing as a source of short-term find available to the organization.
However, the beneficiaries of the study are the people in the economy. Also the lecture lecturing course relating to finance can also benefits from the study above all, I shall benefit from the study, because my future inspirations aim at the financial sector of the economy.
1.6 Scope of the Study
The scope of the study is a wild range one that in attempt to cover it, a lot of different will be encountered in the process. Therefore, the scope of the study is limited to river state in Nigeria.
1.7 Limitation of Study
Time is the major limiting factor associated with the study, finance can also be seen as also a limiting factor associated with the study.
1.8 Definition of the Terms
1. Equipment leasing: This is a phenomena whereby the lesser gives the possession of the equipment of some fund, the ownership of the equipment with the lesser.
2. Lesser: This is the owner of the equipment that is an individual, company and finance house etc.
3. Lessee: This is the person in possession of the of the equipment.
4. Short Term Funds: These are fund with maturity period of 1-5 years.
5. Current Liability: This is the present person or current amount or company owes.
6. Rent: An amount of money paid regularly to the amount of house , land or machine, in order to make use of such things.
7. Bank Fund: This is the amount of money that has been saved or has been made available for a particular purpose.
8. Capital Investment: This is a large amount of money that is invested or used to start a business. It is the act of investing money into something or business, to earn income in future.
9. Finance: This is the money used to run a business. It is a project or an activity of managing money especially a government owned or commercial organization.
10. Growth and Profitability: This is increase in the size amount or degree of something. It is an increase in profitability.
11. Leverage: The ability to influence what people do.
12. Asset: A thing that is valuable or useful. It is especially properly that a person or company owns, which can be used or sold to pay depts.
13. Fixed Term Loan: This is money that an organization such a bank lends and somebody borrows:for a given period of time
14. Transaction: This is a piece of business that is done between people especially an act of buying and selling.
15. Balance Sheet: A written statement showing the amount of money and property that a company has and also listing what has been paid out or received.
16. Liability: This is the state of being legally responsible for something. The amount of money that a person or company owns which must be paid.
17. Bad Debt: This is a debt that is not likely to be paid or recovered from the debtor. It is under probability
18. Arrears: This is money that somebody owns that they have not paid till the time passes. It is to be late in paying money that you owe.
19. Abscond: The act of escaping especially with money that does not belong to you
