Boswell Manufacturing Company has been in business for five years. The company has now decided to expand its operations. To finance this process, the company is considering two approaches: (1) Lease the assets that are needed on a long term basis or (2) Issue bonds and use the proceeds to purchase the assets. The CEO is seeking your advice on the matter. Without knowledge of the comparative cost involved, how would you advise him in the following questions: (i) What might be the advantages and disadvantages of leasing the assets instead of owning them. (List at least three advantages and three disadvantages) (ii) How will leasing the assets instead of owning them affect the financial statements?
Boswell Manufacturing Company has been in business for five years. The
company has now decided to expand its operations. To finance this process, the company is considering two approaches:
(1) Lease the assets that are needed on a long term basis or
(2) Issue bonds and use the proceeds to purchase the assets. The CEO is seeking your advice on the matter. Without knowledge of the comparative cost involved, how would you advise him in the following questions:
(i) What might be the advantages and disadvantages of leasing the assets
instead of owning them. (List at least three advantages and three
disadvantages)
(ii) How will leasing the assets instead of owning them affect the financial
statements?
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