An equipment lease transaction can differ on the basis of (i) the extent to which the risks and rewards of ownership are transferred, (ii) number of parties to the transaction (iii) domiciles of the equipment manufacturer, the lessor, the lessee and so on. Risk, with reference to leasing, refers to the possibility of loss arising on account of under-utilization or technological obsolescence of the equipment, while reward means the incremental net cash flows that are generated from the usage of the equipment over its economic lift and the realization of the anticipated residual value on expiry of the economic life.  On the basis of these variations, leasing can be classified into the following types: (a) Finance lease and Operating lease, (b) Sales and lease back and Direct lease, (c) Single investor lease and Leveraged lease and (d) Domestic lease and International lease.

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