Leasing Buildings Advantages and Disadvantages

Table of Contents Introduction Advantages Disadvantages Sale of the Company’s Headquarters Building Reference List Introduction The purpose of this business report is to analyze and discuss the advantages and disadvantages of leasing buildings, medical equipment and office furniture and equipment. This analysis should explain how the company will benefit (or lose) from selling its headquarters and leasing them back from the buyer.Advertising We will write a custom report sample on Leasing Buildings Advantages and Disadvantages specifically for you for only $16.05 $11/page Learn More It is essential to understand the pros and cons of such an action before embarking on it. Thus a professional investigation should reveal the advantages and disadvantages of selling and then leasing the company’s headquarters as opposed to maintaining them. Through understanding this breakdown, the management will be in a better position to decide whether to sell or maintain them. Advantages Leasing can be defined as the act of obtaining something (for example property, equipment, or building) from another person (the owner) for a specific period of time under a lease agreement and payment of lease charges. One benefit of leasing is that it trims down the cost of ownership of essential assets whose expenditure involves colossal amount of cash. Through leasing, an individual can be able to finance many assets compared to purchasing only one brand new asset. Another advantage of leasing is that, one is relieved off the worry of disposing an asset once it is worn out. All assets (except land) depreciate in value and become obsolete with time (Anon. â€Å"Advantages and disadvantages of lease financing for businesses†, 2005). The owner has to dispose off the assets that can no longer be used and obtain new ones. However, the person leasing the equipment is under no obligation liable for replacing the assets once they are worn out an d leaves them as they are once the lease period is over. Under leasing, one pays a fixed rate every month which is also inflation friendly. That is, as inflation rises the lease rate remains constant over a period of up to five years. Another advantage of leasing is that, one is able to utilize equipments by renting only the necessary equipments. Once a lease period is over, a person can be able to upgrade with technology by leasing new equipments as opposed to owning old and outdated equipments which would be difficult or rather expensive to dispose and buy the new ones. Leasing also has tax benefits that depend on the structure of the lease (Anon. â€Å"Leasing in Business- advantages and disadvantages†, 2009).Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Disadvantages Leasing is a form of financing that is preferred by many businesses, although not all. Before leasing, certain things has to be put into consideration such as the type of equipment required, and the kind of business. Also one has to consider the tax implications between leasing and purchasing the equipment. One of the bad things about leasing is that it becomes expensive in the long run as opposed to owning the item. In leasing one can rent an item over long periods of time and will never own the item (Wakelin, et al 2003). If the money spent on leasing can be accumulated it would by far be more than the actual money that would have been spent if the item was bought from the very start. Another disadvantage is that, if the lease agreement is terminated before it expires, mainly because of damage, then the person leasing the item in question will be expected to pay additional charges on top of the lease charge. Not everyone can lease equipment, before being allowed to get any equipment through leasing; one has to prove credit worthiness and good employment history. This becomes an advantage for one who is buying the item since there are no qualifications that have to be met. Sale of the Company’s Headquarters Building One advantage the company stands to benefit from by selling its headquarters building is an increase in its current liquidity status which can be used to expand production. By leasing the building, the company will have to pay a small amount of money every month giving it a chance to expand the business and concentrate on more productive ventures. Another advantage is that it will not have to lease the entire building but can lease some offices and utilize them for maximum production. By leasing, the company is not required to cater for depreciation but will only pay the lease charges as agreed irrespective of the period of time it remains on the leased building (Enterprise Financial solutions, Inc 2002). One disadvantaged of selling the buildings is that, the company will receive a significant less amount of money than it had spent to put up the b uilding or to purchase it when it was still new. By leasing the building, the company will not have equal rights over the building like before and will be expected to maintain it in a good condition. The new owner has a right to terminate the lease agreement if the company messes around with it and will be expected to pay an additional charge to repair the building. In the long run, the company will pay a higher amount of money that the amount obtained at the time of sale (Spiritleo, 2010).Advertising We will write a custom report sample on Leasing Buildings Advantages and Disadvantages specifically for you for only $16.05 $11/page Learn More I would therefore advice the management of the company not to dispose the building because the long run benefits of maintaining it surpass the proceeds obtained from selling it. The building can also be used as collateral for borrowing loans from financial institutions which would otherwise be difficult if the comp any has no tangible assets. Reference List Anon. (2005). Advantages and disadvantages of lease financing for businesses. Allbusiness.com. Web. Anon. (2009). Leasing in Business- advantages and disadvantages. Web. Enterprise Financial solutions, Inc (2002). Advantages of leasing. Web. Spiritleo (2010). Advantages and disadvantages of leasing. Web. Wakelin, et al (2003). Leasing equipments for business. Web. This report on Leasing Buildings Advantages and Disadvantages was written and submitted by user Hug0 to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

Deferred Compensation

Deferred Compensation Deferred compensation plans are arrangements by which a part of an employee’s compensation is paid at a later date, or put into investment instruments that the employee can only access at some point in the future Benefits and Hazards of Deferred Compensation There is a large variety of deferred compensation plans, arrangements by which a part of an employee’s compensation is paid at a later date, or put into investment instruments that the employee can only access at some point in the future. There are two basic reasons for deferred compensation. From the employee’s point of view, it reduces  or at least postpones his income tax liability. For employers, deferred compensation helps to manage payroll costs and can be used as an incentive for better employee performance. Types of Deferred Compensation The most common type of deferred compensation plan is the â€Å"defined contribution plan†: A  portion of the employee’s pay is deducted and invested on his behalf, usually in some form of mutual fund.   These are familiar to workers in the US as the â€Å"401(k)†, named after the section of Internal Revenue Code that pertains to them. The deferment from the employee’s salary is made before income taxes are withheld, which is a benefit to both employees and the employer. Employees do not pay taxes on their investments until they withdraw them sometime in the future, and employers are able to reduce the amount of withheld taxes they must remit to the government. Many employers also match all or part of the employee’s contribution, providing an extra incentive for employees to participate in the program; this helps to reduce the company’s transactions costs for maintaining the investment package. In the US, 401(k) programs have the added security of being protected by law from creditors in case of the company’s bankruptcy, although the value of the employees’ investments can fluctuate; in the wake of the 2008 financial crisis, millions of US workers saw the value of their 401(k) savings drop as stock markets plummeted. Other kinds of deferred compensation packages not covered by the same regulations as 401(k) programs are more risky, although they generally offer higher returns. Non-401(k) programs are generally only offered to the highest-earning employees who also pay the highest rates of income tax. The main reason for these kinds of programs is that there are legal limits on the amount of money that can be deferred into a 401(k). The main risk is that there is much less regulation of non-401(k) programs, and they are not protected from bankruptcy. Many workers in the US discovered they had lost their investments in the wake of the financial crisis when their employers declared bankruptcy. Read also:  Financial Rewards  |  Money Makes the World Go Around Stock purchase plans and stock option plans are also common forms of deferred compensation: In a stock purchase plan, the company establishes a trust to receive employee contributions, which are converted to shares of the company’s stock.   Stock purchase plans are regulated in much the same manner as 401(k) programs, the only real difference being that instead of contributions being invested in an array of mutual funds, they are only reinvested in the company. The plan is popular with employers and employees alike; for employers, the stock purchase program is reflected in better cash flow and tax savings and is seen as a useful tool to increase employee productivity. Employees benefit by gaining an ownership stake in the company, and some small degree of control over the growth in value of their investments. Stock option plans differ in that the employee is not actually compensated in the form of stock, but â€Å"earns† options to purchase the company’s stock at a low fixed price in the future.   A stock option plan has most of the same benefits as a stock purchase plan  but allows the company to keep control over its shares for a longer period. Employees in rapidly-growing companies benefit the most from stock option plans; a well-known recent example is Facebook, which launched a highly-publicized – and unintentionally controversial – IPO in 2012. Facebook employees who had exercised their options prior to the IPO were able to profit handsomely from the high price Facebook shares fetched in the market, but their returns were reduced somewhat by a condition that they hold their shares for a time before selling them; Facebook’s share price dropped rapidly after the IPO, so employees who waited too long to sell shares saw very little profit, or even lost money in some cases. Another less well-known version of a stock-based deferred compensation plan is called the â€Å"phantom† stock plan: It provides employees benefits similar to those they would receive from owning company stock, without actually giving stock to the employees.   For example, employees might be compensated in â€Å"stock credits† equivalent to shares of stock, from which they can receive bonus payments based on the stock’s performance or dividends paid. Because phantom stock plans are hard to regulate and do not provide many benefits to employers as conventional purchase or option plans. What Should  Employees Look for in Deferred Compensation Plans? Because deferred compensation programs are based on investments that can lose as well as gain value, employees considering a compensation offer should make sure they understand the details of the deferred compensation package. 401(k) programs are the most highly-regulated and most secure  but vary in the specific funds or investment instruments they contain. In the 2008 financial crisis, many 401(k) holders watched their investments vanish  because a large number of 401(k) funds were heavily invested in popular but ultimately worthless mortgage-backed securities. For stock-based deferred compensation plans, the biggest issue is what part of the employee’s compensation the plan is supposed to represent since it is very difficult to quantify the future value of stock. Employees should ask for details about whether a certain level of returns or other incentives is guaranteed, and what limits are imposed on stock purchases or sales. Compensation is compensation, whether deferred or not, and it is up to an  employee  to decide whether or not what he can expect to earn, in whatever form he will receive it, is a fair exchange for his work.

Non- cash payment Assignment Example | Topics and Well Written Essays - 500 words

Non- cash payment - Assignment Example Nonetheless, the counteraction measures have become better too to reduce the risk of fraud when using non-cash payment methods. I have learnt that according to a report compiled by Australian Payments Clearing Association, card fraud cases have increased from 43.6 cents to 48.7 cents for every $1000 spent by consumers and businesses. People have abandoned use of cheques and instead prefer to use cards to make payments. The report also revealed that 4% of the total amount of money transferred by use of cards in Australia has landed in the hands of fraudsters. The situation was worse in UK. In 2013, there was a 3% increase in non-card fraud for 43.4 million euros spent. Counterfeiting and skimming increased at an alarming rate (Australian Payments Clearing Association, 2014). Using cards has proved riskier than using cheques when making payments given the statistics from the Australia and UK of 2013. It could be because of the simplicity and wide acceptance of using cards to make payments that have made it easy for fraudsters to improve on their game. They are by financial institutions and mobile payments outlets too. The APCA report also indicated that the fraud cases have increased following a massive shift from physical shopping to online shopping for most of the Australian consumers. The last four years have seen 35% expansion in online shops in Australia (Apca.com.au, 2014). The trend is catching up in other parts of the world. Since card is the preferred mode of payment, domestic and cross-border frauds have increased. I would prefer to use cheques other than a card to make payments putting into consideration that the rate has decreased in the last two years. APCA reported indicates that cheque fraud fell from 0.8 cents to 0.6 cents for every $1000 spent by Australian users (Australian Payments Clearing Association, 2014). The trend is attributed to the fact that it is hard to counterfeit, dishonour and to breach its mandate in financial institutions All