Conversely, why is cff higher under operating lease.
I under stand the under cap-leases depreciation is part of what makes CFO higher do adding it back. where as op-lease the entire lease pmt hits net income.
But cash flow from financing part I just don’t get?
In a capital lease, the lease payment is split between interest and principle; the interest is an operating cash outflow, the principle is a financing cash outflow.
In an operating lease, the least payment is rent; rent is an operating cash outflow.
Thus, there is no CFF outflow in an operating lease, so CFF is higher.
Is it fair to say that at inception: you have borrowed the $ purchase amount from the lessor ----> and simulatenously purchased the asset ( assuming capital lease) – As shown on the BS.
as you make lease pmts… interest is CFO and principal is CFF (cash out flows) making it lower.
GO it! thanks!
Yes: a capital lease is nothing more than a purchase on credit.
Good to hear!
My pleasure.
My pleasure.
(Sincerely: I enjoy this.)
You really are the BEST haha…appreciate the clear and concise help.
I just wish that the cats and the dog and the horse appreciated me as much as you guys. I never get the cats fed quickly enough, never pet the dog enough, and never have enough treats for the horse.