Introduction
1.1 Background Of The Study
Equipment leasing is basically a loan in which the lender buys and owns equipment and then recits it to a business at a flat monthly rate for a specified numbers of months. At the end of the lease, the business may purchase the equipment for its fair market value (or a fixed or predetermined amount) continue leasing, lease new equipment or return it. The use of certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payment, the lesses is the receiver of the services or the assets under the lease contract and the lessor is the owner of the asset. In today’s business equipment leasing and loans can enhances liquidity, productivity and competitiveness. Businesses are looking for ways to control costs, the leasing industry has emerged as a strategic financing option that companies of all sizes are utilizing to leverage capital, increase cash flow, take advantage of tax benefits and hedge against the risk of technological obsolescence. Equipment leasing offers companies the opportunity to procure equipment at a fixed rate, for a fixed amount of time without having to purchase equipment outright, by leasing, a company is relieved of the uncertainties and risks associated with equipment ownership and can concentrate on using that equipment as a productive part of its business. Equipment leasing has always been a strategic solution for businesses, and with the economic uncertainty of the past, businesses in all sectors of the economy are considering how leasing can help them successfully ride out the storm. Equipment leasing offers valuable financing options that allow companies to maximize their purchasing power. The rate of profitability and growth of a business organization be it a new business or an already existing business depend largely on its investment and financing decision these decisions would generally include acquisition, expansion, modernization and replacement of fixed assets using the companies tools of capital employed.
1.2 Statement Of The Problem
Despite the enviable prospect equipment leasing, it is still face with some fundamental problems which are of great concern to this research work, they are;
- Equipment leasing does not provide the prestige of ownership.
- The flexibility to dispose of obsolete equipment before the end of lease may be reduced.
- A fixed obligation to pay rental is created which may be an embarrassment in depressed condition.
- It is almost always more expensive in the long run.
- Do companies benefit from lease financing?
- Are people aware of leasing as a source of financing fixed assets?
1.3 Purpose Of The Study
The purpose spells out what the researcher is designed to explore and is as follows.
- To ascertain the contribution of equipment leasing to gross earning.
- To ascertain the extent to which gross earning and its rental income are positively corrected.
- To expose the advantage of using equipment leasing as a cheaper means of financing business project.
1.4 Research Questions
- Does equipment leasing contribute positively to gross earnings? ii.Does equipment leasing contribute to profitability?
- Is equipment leasing a cheap means of financing business project?
1.5 Research Hypothesis
Ho: There is no significant relationship between equipment leasing and organizational profitability.
H1: There is a significant relationship between equipment leasing and organizational profitability.
1.6 Significance Of The Study
The findings of this study is expected to provide insight into the operational justifications for leasing alternatives as a viable option of financing asset. The result of this study will contribute a guide to corporate bodies, potential and existing investors and the general public as they make future financing and investment choice and decisions. The study also will be of great importance to corporate leasing activity as one of their major business concern. This study also makes government realize the need to lay more emphasis on equipment leasing as a means of financing public project. It made the entrepreneur of small and medium scale businesses to be aware that apart from loan agreement, there is lease portfolio as alternative means of financing. Lastly, it will serve as a reference materials for current and future researcher that will be conducting research on equipment leasing as other source of financing.
1.7 Scope And Limitation Of The Study
The study covers the practices, prospects and problems of equipment leasing from the view point of the lesser represented by corporate companies or individual companies. In this study we will focus on Rain Oil Nigeria, Ltd, Ogharefe and its rental incomes which encourages foreign investors to invest. The research work was faced with the challenge of funds, limited time for the research and unwillingness of respondents as the case study to part with information that will be of great benefit to the researcher.
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