The lease vs. purchase decision

Article Abstract:

Companies acquiring equipment must base lease vs. purchase decisions upon a capital budgeting analysis that examines financing alternatives in light of the financial impact of tax rules and accounting principles, the effect on debt structure, and corporate financial policies. Financial calculations based on four alternatives for acquiring equipment are presented, including cash purchase, purchase with 80% financing, five-year true lease, and five-year conditional sales. Companies that decide to lease equipment should base their capital budget analysis on an evaluation of the impact of leasing alternatives on financial statements, financial ratios, financial flexibility, and risk management. Issues to be considered by a company contemplating leasing include: flexibility at the end of the lease, exposure of rates to interest rate changes, and responsibility for taxes and maintenance.

Analysis, Interpretation and construction, Purchasing, Corporations, Leases, Lease or buy decisions

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Managing risk with derivatives

Article Abstract:

Derivatives are financial instruments that can be used to manage the financial risk of a company. These are contracts that derive their value from a certain underlying asset, reference rate or index and that transfer price, interest rate or currency exchange rate risk from the hedger to another entity. Properly used, they can counterbalance existing risks to minimize potential losses and stabilize cash flows in a speedy, precise, flexible and inexpensive manner. The four primary types of financial derivatives are forwards, futures, options and swaps. The choice of the derivative will be based on management and specific company traits. In managing the risk of derivatives themselves, it is important to create effective oversight by the board of directors, audit committees and senior management.

Methods, Usage, Risk management, Derivatives (Financial instruments)

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Teaching activity-based costing

Article Abstract:

Activity-based costing (ABC) is an integral aspect of cost management and managerial accounting curricula. In order to effectively educate business students about the ABC model, various forms of resources must be made available to them. These sources include journals that feature ABC articles such as 'Management Accounting,' 'Harvard Business Review' and 'Journal of Cost Management'; case studies such as those compiled in 'Cases From Management Accounting Practice' volumes and in the textbook 'The Design of Cost Management Systems by Robert Kaplan and Robin S. Cooper from Harvard Business School cases; and conferences and symposia on ABC and related topics.

Accounting, Study and teaching, Cost accounting, Managerial accounting

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