Lease vs. Purchase - Report Example

1. Lease vs. Purchase: Leasing is a preferred choice when businesses need assets which keep requiring to be up d along with the changes in technology. There are a few considerations that need to be considered to understand the circumstances where the businesses can decide to choose between leasing and buying of the equipments. Leasing is a choice under two main circumstances. Firstly it is essential to analyze the financial conditions of the company, following which a consideration of the total cost for acquiring the equipments, business cash flow and also potential tax benefits need to be considered. Also the non financial aspects of the business also need to be considered like the asset management issues, the replacement schedules, tech support needed and the cost of scrapping the equipments. 2. Capital Structure: Choice of a determining the optimal mix of components of the capital structure is a very complex process and involves a number of different considerations. A number of different views of the capital structures need to be considered like the net corporate or personal tax, agency costs, bankruptcy cost and pecking order. There are a few components which build a company’s capital, these are: Ordinary shares, preference shares, debentures, and loan stock. Deciding the optimal mix is based on finding the right mix of long term funds which allow minimizing the cost of capital and helping maximize the value of the organization. This situation is referred to as the optimal capital structure. However, it is a known fact that gaining an optimal capital structure is not possible since, the changing of the mox of capital does not change the values. 3. Background check before employing a person is a very important precautionary step that needs to be undertaken by every company. This is majorly because almost every business deals with a lot of sensitive information. The level of sensitivity of the information is very varied. For instance, some companies handle information like social security numbers, credit card information, driver’s license information and other types of personal information. The handling of this information with complete care and precaution is a very essential aspect of any employment and if any information is misused it is the business which would be held responsible for it. Hence there is a high need for background checks to be performed even though the checks might not be as useful as frauds will be able to overcome the background checks and create fake responses. However, it is always important that the businesses take every possible precautionary measure on their side to ensure that they have been careful from their end and if any fraud is to happen the business would not be held responsible for the fraud, but it would be the individual who would be held responsible. 4. As has been discussed in the previous answer, the fraudulent activities cannot be tracked easily. In the case of Joe, it is clear that he has been able to pass the background checks as he has done this sort of fraud earlier as well. Thus while considering if it is possible for a company to ensure that the employees that are employed in the company have a clean background, it is essential that the company perform a check. Firstly, it is important to understand that there is no one database and it is literally impossible for a company to track all the records of the employees who are appointed as the information gained could be fraudulent as well. Also it could be possible that all the states of a country have a common database, here the employee details are held, or even attached to the SSN of the employee. This will allow for the complete history of the employees to be attached to them throughout their lives, irrespective of whether the job is a part time or a full time. Taking the case of Joe, here it could be safely said that the fault was from both the company as well as the employees. Firstly, the fault of the business is that, while allowing a new employee to undertake all the finances of a company, it is essential that an older employee or another senior person of the company also keeps an account of all the transaction, and there should be a person who should be needed to sign off the papers. This is a precaution that the company needs to take as the only people at loss here would be the company, due to the negligence of the owners. However, considering the fact that the company did do its part of checking for the background, it is completely Joe’s fault and serious action needs to be taken to ensure that the same issue does not happen again in the future. Hence it is important that more care is taken by the employers to ensure that the finances of the company are straight and not leave any open options for fraud within the company. 5. Benford’s law is an interesting aspect which contradicts the simple assumption that the probability of having the first digit of a number as ‘1’ is 1/9. According to Benford, the probability for the first digit being ‘1’ is about 30.1% which is the highest when compared to the other numbers. This can help identify the genuine data sets or large sets of genuine accounting data in contrast to those developed by the random number generators or fake accounts. It works on the basis that when a data is prepared from ‘natural’ (genuine) numbers and not ‘made up’ numbers, then 30.1% of those numbers will have the first digit as ‘1’. 6. White collar frauds have a good knowledge of a number of different topics and a lot of general knowledge. Being a white collared fraud it is essential that the people know exactly what they are planning to do. These kinds of people in most cases have a clearly chalked out plan and use the management techniques to put the fraud into act. A very good example of this in the recent past is that of Satyam Company, India. The person who was responsible for the fraud was the CEO of the company himself. He had cooked up the books of the company and used this to cheat the stock holders and the company as the whole. In cases like these, the best option and the only ruling or punishment which might help is to arrest the accused and sentence them to a life time. This is the only mode to keep them away from trying another fraud. Also with the current growing availability of technology and the chances are if the frauds are left free after the first time, it is clear that there would still be a number of different attempts to try more frauds in the future. 7. Trying to get hold of a white collar fraud requires a lot of skills as well as being well read. This is a very important aspect as discussed earlier the white collared frauds are in most cases, well read with a good knowledge of the current events and also with strong knowledge of both accountancy as well as law. Hence, if attempts are being made to get hold of these people, it is essential that a people with good all around knowledge along with the four major skills that are needed. This will allow the fraud examiners to be one step ahead of the criminals or frauds and also be able to in some terms avoid frauds. This is a very vast knowledge that is required and hence it is for people with a motivation to learn and interest in the subject of fraud examining. Read More