Lease Utilization

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Gross Lease

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

    A lease considered to have the economic characteristics of asset ...
  3. Lease

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

    A contract that allows for the use of an asset, but does not ...
  5. Closed-End Lease

    A rental agreement that puts no obligation on the lessee (the ...
  6. Capitalized Lease Method

    An accounting approach that identifies a company's lease obligation ...
Related Articles
  1. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  2. Insurance

    Everything Investors Need To Know About Earnings

    We go over the concepts behind the excitement over the most important figure in the stock market.
  3. Investing Basics

    The Flow Of Company Information

    Learn how to gather all the pieces before you start to put together your puzzle.
  4. Markets

    5 Tricks Companies Use During Earnings Season

    Don't be fooled: Companies use all kinds of tactics to make bad earnings look good. Find out how to see through them.
  5. Bonds & Fixed Income

    Uncovering Hidden Debt

    Understand how financing through operating leases, synthetic leases, and securitizations affects companies' image of performance.
  6. Delivery duty paid (DDP) is a shipping term.
    Investing

    What does DDP Mean?

    Delivery duty paid (DDP) is a shipping term specifying that the seller is responsible for all costs associated with delivery of the goods to the buyer. It is usually used when goods are exported ...
  7. Fundamental Analysis

    What is a good interest coverage ratio?

    Learn the importance of the interest coverage ratio, one of the primary debt ratios analysts use to evaluate a company's financial health.
  8. Fundamental Analysis

    What is a bad interest coverage ratio?

    Understand how interest coverage ratio is calculated and what it signifies, and learn what market analysts consider to be an unacceptably low coverage ratio.
  9. Active Trading Fundamentals

    What is liquidity risk?

    Learn how to distinguish between the two broad types of financial liquidity risk: funding liquidity risk and market liquidity risk.
  10. Technical Indicators

    What is a good gearing ratio?

    Understand the meaning of the gearing ratio, how it is calculated, the definition of high and low gearing, and how they reflect relative financial stability.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center