Imagine that you are the Chief Financial Officer (CFO) of a startup airline comp
ID: 2783105 • Letter: I
Question
Imagine that you are the Chief Financial Officer (CFO) of a startup airline company. The executive management team has tasked you with making a recommendation about whether the company should buy or lease airplanes. Analyze the major pros and cons for leasing and buying assets. Based on your analysis, provide a recommendation to the executive team. Imagine that you are the Chief Financial Officer (CFO) of a startup airline company. The executive management team has tasked you with making a recommendation about whether the company should buy or lease airplanes. Analyze the major pros and cons for leasing and buying assets. Based on your analysis, provide a recommendation to the executive team.Explanation / Answer
In a start up biggest hickup is with cash arrangements,
Pros of Leasing:
Cash flow can be manages as there will be no capital committments
Maintenance can be carried out by the supplier
Resources can be better utilised in other areas
Cons of leasing:
Ownership of assets will not be with the company
Reverse is the case with ownership.
Considering the risk of failure a start up faces and the problem in sourcing the funds its better to lease major equipment than owning it.