Lease Utilization


DEFINITION of 'Lease Utilization'

A financial ratio that measures how much a company uses leasing arrangements to acquire its fixed assets. Utilization ratios come in two types, which correspond with operating leases and capital leases respectively: operating lease utilization and capital lease utilization.

BREAKING DOWN 'Lease Utilization'

Looking at the lease utilization is a good way to identify whether differences in the financial metrics of comparable firms may be due in part to differences in the way that assets are acquired. A capital lease affects the financial statements much in the same way that buying the asset on credit would. However, if a company makes heavy use of operating leases, then the assets are not reflected on the balance sheet. Therefore, due to the lower amount of assets, it may appear that the company is generating a higher return on assets. However, this could be merely an accounting phenomenon that occurs as a result of the alternative asset acquisition method.

  1. Gross Lease

    A type of commercial lease where the landlord pays for the building's ...
  2. Lease

    A legal document outlining the terms under which one party agrees ...
  3. Operating Lease

    A contract that allows for the use of an asset, but does not ...
  4. Capital Lease

    A lease considered to have the economic characteristics of asset ...
  5. Capitalized Lease Method

    An accounting approach that identifies a company's lease obligation ...
  6. Closed-End Lease

    A rental agreement that puts no obligation on the lessee (the ...
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