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Why the consultant prefers operating to finance lease

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Reference no: EM132521680

Question - Jacklyn Ltd runs a successful chain of fashion boutique, but has been experiencing significant cash flow problems. The directors are examining a proposal made by an accounting consultant that all the shops currently owned by the company be sold and either leased back or the businesses moved to alternative leased shop. The directors are keen on the plan but are puzzled by the consultant's insistence that all lease agreements for the shop be "operating" rather than "finance "leases.

Required -

a. Explain the differences between a finance lease and an operating lease.

b. Explain, why the consultant prefers operating to finance lease.

c. Describe three disadvantages to the company of entering into finance lease agreements.

Reference no: EM132521680

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