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What is the difference between Capital and Operating leases?
Capital leases
• These are long term contracts signed by the company to use certain PP&E over several years in return for payments to the owner (lessor) of the PP&E.
• Although companies are leasing the assets, capital leases treat these contracts as if the company owns the assets and adds it to the balance sheet.
• The assets are depreciated over its useful life and lease payments or rental payments are treated as a liability almost like debt obligations.
Operating leases
• Unlike capital leases which treats the PP&E as if the company purchased it, operating leases sees the company recording no assets on its balance sheet.
• The operating lease payments or rental payments hit the income statement directly.
• On the balance sheet cash goes down by the lease payments and equity reduces by the same amount through retained earnings.
• Many analysts treat operating leases as off-balance sheet financing and will convert them to capital leases to compare apples to apples with other companies in the sector which treat their leases as capital leases.
Despite the onset of Covid-19 and its accompanying challenges, our program registered a 90% placement rate for students on our 8 weeks training programs. Our students secure jobs at marquee investment banks such as Goldman Sachs, Credit Suisse, Morgan Stanley, Citi Bank and Deutsche Bank among others. Please send your CV to info@cityinvestmenttraining.com to check your eligibility for the course.
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