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. Capitalized Lease Method

    An accounting approach that identifies a company's lease obligation ...
  2. Operating Lease

    An operating lease is a contract that allows for the use of an ...
  3. Bargain Renewal Option

    A clause in a lease agreement that gives the lessee the option ...
  4. Triple Net Lease

    A triple net lease assigns sole responsibility to the tenant ...
  5. Fixed Price Purchase Option

    The right, but not the obligation, to buy a leased item at a ...
  6. Gap Amount

    Insurance will only cover a certain amount of coverage if leased ...
Related Articles
  1. Managing Wealth

    When Is Leasing A Car Your Best Bet?

    Leasing a car isn't for everyone. But it's attractive for those who want low initial payments and the ability to get a new vehicle every few years.
  2. Investing

    Uncovering Hidden Debt

    Understand how financing through operating leases, synthetic leases, and securitizations affects companies' image of performance.
  3. Retirement

    Retirees: Should You Buy or Lease Your Car?

    To buy or lease – that is the question. For retirees, access to safer cars, comprehensive warranties and tax deductions may drive up leasing's appeal.
  4. Personal Finance

    Should You Borrow Money for a Car Purchase?

    Does it make sense to take out a loan, pay cash or lease a car?
  5. Investing

    Starbucks' 6 Key Financial Ratios (SBUX)

    Discover the key financial ratios that are important when analyzing the financial health, profitability and efficiency of Starbucks' operations.
  6. Personal Finance

    Wait on Buying a Pickup (F, GMC)

    Used car prices are dropping everywhere. But if you're in the market for a pickup truck, a good bargain is less of a guarantee – thanks to strong demand.
  7. Investing

    5 Tips For First-Time Renters

    Knowing the main points of a lease will make sure you don't sign - and end up paying for - something you don't want.
  1. What are the differences between single, double and triple net leases?

    Learn the ins and outs of net lease agreements, including the key differences between single net, double net and triple net ... Read Answer >>
  2. What kinds of real estate transactions use triple net (NNN) leases?

    Learn how a net-net-net or triple net lease works and why it is popular in commercial real estate transactions. It is also ... Read Answer >>
  3. If a telecommunication company wants to build a tower on my land how much should ...

    Get help in understanding how much income it is possible to receive for leasing land to a telecommunications company for ... Read Answer >>
Hot Definitions
  1. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  2. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  3. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  4. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  5. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
Trading Center