What is leasing?

Leasing is specifically defined as a contractual agreement where one party, the lessee, pays another party, the lessor, for the use of an asset over a specified period. This arrangement allows businesses or individuals to utilize assets without having to purchase them outright, which can be a significant financial advantage. Leasing typically involves regular payments made over the lease term, while ownership of the asset remains with the lessor. This setup is particularly beneficial for businesses that want to keep their capital free for other uses or that need flexibility in their asset management.

The other options describe different financial concepts. For instance, buying assets outright refers to the direct purchase of an asset, which is not applicable to leasing. Equity financing involves raising capital by selling shares in the company, which does not relate to the utilization of an asset through leasing. Lastly, a loan secured against an asset implies borrowing money with the asset as collateral, differing fundamentally from leasing, where the asset is rented instead of owned. Understanding leasing is crucial for businesses evaluating their asset management strategies and financial planning.