Lease finance Vs. Hire Purchase finance

 Hire purchase is a purchase of an asset in which customer makes down payment and finance rest of the amount through financial institutions or banks. On rest of the unpaid amount he pays interest at a certain pre-described rate of interest.

After making complete payment the assets becomes the legal right of customer. Lease on the other hand is an agreement of using asset for certain period and paying rent on it at a pre-described rate of interest. It is a temporary acquiring of an asset just to use it. Generally Pvt schools are build on lease land. Interest on lease is fully exemption from tax.

Particulars	Lease	Hire Purchase
1. Ownership of Asset	Ownership lies with the lessor. Lessee has the right to use only.	Hirer becomes the owner subject to full installment is paid.
2. Depreciation	It is claimed as an expense in the books of lessor.	It is allowed to the hirer in case of hire purchase transaction.
3. Rental Payments	Rentals cover the cost of using an asset.	Installment is inclusive of the principal amount and the interest for the time period the asset.
4. Duration	It is done for longer duration.	It is done mostly for shorter duration
5. Tax Impact	Total lease rentals are shown as expenditure.	Hirer claims the depreciation of asset as an expense.
6. Repairs & Maintenance responsibility	Lessor is responsible in case of operating lease.	Hirer is responsible.

Management Reports

 Management report is a statement made by management and it is used to compare the actual results achieved with the budgeted forecast levels. This report helps the management to see where they went wrong and they apply other measures to improve the business.

A  business  management report  is  a  formal  statement of  the  results  of  a business, or of any matter on which definite information is required, made by some person or body. It may be presented orally or in written form. In business management report, situations are analyzed, conclusions drawn, alternatives considered and recommendations made.

Hire Purchase Finance

 Hire Purchase is a kind of installment purchase where the businessman (hirer) agrees to pay the cost of the equipment in different installments over a period of time. This installment covers the principal amount and the interest cost towards the purchase of an asset for the period the asset is utilized. The hirer gets the possession of the asset as soon as the hire purchase agreement is signed. The hirer becomes the owner of the equipment after the last payment is made. The hirer has the right to terminate the agreement anytime before taking the title or the ownership of the asset.

Planning of Profit

 The profit planning is refers to process of developing that outlines the planned sales revenues and expenses and the net income or loss for a time period. Profit

planning requires preparation of a master budget and various analyses for risk

and what-if scenarios. Tools for profit planning include the cost - volume - profit

(CVP) analysis and budgeting.

The actual process of profit planning involves looking at several key factors relevant  to  operational expenses. Putting  together  effective profit  plans  or

budgets requires looking closely at such expenses as labor, raw materials,

facilities maintenance and upkeep, and the cost of sales and marketing efforts.

 

 

Variable Working Capital & Permanent/ Fixed Working Capital

 Fixed working capital is that portion of the total capital that is required to be maintained in the business on the permanent basis or uninterrupted basis. This working capital is required to invest in fixed assets. The requirement of this type of working capital is unaffected due to the changes in the level of activity.

Variable working capital is that portion of the total capital that is required over and above the fixed working capital. This working capital is required to meet the seasonal  needs  and  some  contingencies. The  requirement  of  this  type  of working capital changes with the changes in the level of activity.