Assignment Help:healthcare leasing financing
Due to the healthcare industry constantly changing the way they approach opportunities, and with the finally improving economy, organizations are looking at ways to increase their growth and financial opportunities. The article I chose this week discusses what may be the best way to achieve the growth desired. I found this article useful because it gives questions to ask yourself when trying to decide between a leasing or buying equipment, or acquiring additional buildings. By looking at each alternative it can be used as a tool to determine what to lease and what to buy.
Many of the questions asked are focused on the budget, and how it will increase the revenue of the organization. Leasing can provide lower monthly payments, but that is dependent on how long the leasing period is for. It is stated that if the lease is longer than 36 months it may be advantageous to purchase the equipment, as it will provide some amount of ROI. However, purchasing most of the time requires a down payment and upfront costs which some organizations may not have in the beginning and will need the financing to acquire the equipment.
Depreciation expense also needs to be considered when determining whether to buy or lease as tax treatment is an important factor to consider when deciding. A loan can provide the buyer with the depreciation tax benefits, but a lease provides a lesser payment amount. This is dependent on if the organization will actually be eligible for the tax benefit, and if not it may be in the best interest of the organization to lease.
By leasing, the depreciation can be traded to the lessor to get a better cash flow (Sutton, 2014). Wang (2015), also states in general terms, when the term is longer than six years, the time value of money and all of the cash flows need to be evaluated to determine how much the working capital will be influenced.