When a company borrows money to buy assets, it records the loan on the liability side of the balance sheet and the assets—for instance, trucks—on the asset side. This can impact productivity ratios or profitability ratios like return on investment (ROI), return on assets (ROA), and return on equity (ROE).
“If your company has depreciating assets like trucks and you don’t generate an improved return or profitability for each dollar you invest in those trucks, your financial ratios may be out of order not only for internal reporting, but also for your company’s future financial needs,” says Olen Hunter, director of sales at PacLease.
“Full-service leasing can minimize the number of assets you use to produce a certain amount of income or profit,” Hunter explains. “Your company’s balance sheet will look much more favorable.”