Often, a lease agreement will include a clause which gives the lessee the ability to extend or renew the lease of an asset at below-market rates. Including this option in the agreement would require the lease classification to be that of "capital" (asset is treated as lessee's property for accounting purposes and remains on their balance sheet), rather than "operating" (payments considered as rent and thus operating expenses, with the asset not being listed on the balance sheet).
So, let's say a hole-boring machine is worth $25,000/year and the lease agreement contains a bargain renewal option. In this situation, the lessee could trigger the clause and obtain a lease on the equipment for $18,000/year. Better than a hole in the head.
Related or Semi-related Video
Finance: What is Dead Cat Bounce?13 Views
Finance allah shmoop What is a dead cat bounce It
sounds like a dance move from the old west right
but it actually refers to a terrible situation when the
market plummets rebounds very slightly and then plummets again The
idea comes from the notion of dropping a cat off
of a high building It hits the cement dead bounces
a bit before then is a big wet thud Yeah
peeta no cats were harmed in the production of this
definition Thie market has fallen from five thousand twelve hundred
now it's at fourteen hundred and now it's back to
twelve hundred Yeah that uplift of two hundred points there
from twelve hundred fourteen hundred before it went back twelve
hundred which is the concrete that's the dead cat bounce
I'm not totally sure who came up with this term 00:00:50.247 --> [endTime] but wei have a pretty good idea
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