• A long-term rental agreement, and a form of secured long-term debt.

 Embedded terms in definition
 Referenced Terms
 Bargain purchase price option: Gives the lessee the option to purchase the asset at a price below fair market value when the Lease expires.

 Break even lease payment: The Lease payment at which a party to a prospective lease is indifferent between entering and not entering into the lease arrangement.

 Capital lease: A Lease obligation that has to be capitalized on the balance sheet.

 Capitalized lease: A financial (capital) Lease that has the present value of all its payments included as an asset and corresponding liability on the firm's balance sheet, as required by generally accepted accounting principles as set out in the CICA Handbook.

 Coverage ratios: Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and Lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.Ratios that measure the firm's ability to pay certain fixed financing charges. Includes times interest earned ratio and the fixed-charge coverage ratio.

 Related Terms

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