What is ‘Lease Payments’
A line item under long-term debt on a balance sheet that indicates the value of future lease payments due.
Lease payments vary widely between companies, and so it is not necessarily good to compare two companies’ lease-payment figures, even if they are in the same industry. It is more valuable to compare long-term debt as a whole.
Explaining ‘Lease Payments’
Lease payments can be made by individuals as well as companies. Leases are most commonly used by individuals to finance cars, but can also be used to obtain computers and land, among others things.
A company’s lease payments are used in the calculation of the fixed-charge coverage ratio. This ratio helps investors see if a company can cover its fixed expenses, such as leases and interest.
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- CEO ownership, leasing, and debt financing – www.jstor.org [PDF]
- Valuing lease contracts a real-options approach – www.sciencedirect.com [PDF]
- Operating leases: Impact of constructive capitalization – search.proquest.com [PDF]
- Are debt and leases substitutes? – www.jstor.org [PDF]
- Realized returns and the default and prepayment experience of financial leasing contracts – www.jstor.org [PDF]