LeaseForce International - Commercial Equipment Leasing, Financing & Consulting Service Provider

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Obligation

A legal and/or contractual duty to perform or to act in a specified manner.

Obligee

A party who receives the benefit of another party's undertaking to perform a legal and/or contractual duty.

Obligor

A party who undertakes to perform a specified legal and/or contractual duty.

Obsolescence

The process of acceleration of an asset's useful life due to ongoing product innovation and/or continual marketplace changes (e.g. the process of rendering a piece of equipment as antiquated).

Obsolescence Hedge

The leasing benefit that is derived from the ability of a lessee to replace or upgrade from specific leased equipment to the newest and/or most desirable equipment at the end of the lease term rather than being hampered by ownership of an older asset for an indefinite period.

Obsolescence Risk

Acronym for the Organization for Economic Co-operation and Development. The organization is comprised of 29 of the world's most developed, industrialized and market-based economies, and its membership is based on an economic coordination and development group dedicated to the standardized economic development of its member's economies and the expansion of world trade on a multilateral, non-discriminatory basis in accordance with cross-border international obligations. The OECD is comprised of the following countries: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States.

OEM

An acronym for original equipment manufacturer

Off Balance Sheet

Not shown on the balance sheet of a business; the terminology is typically utilized in reference to a liability (i.e. lease) that is not shown on the balance sheet.

Off Balance Sheet Financing

A lease that, although it is used for a financing purpose, qualifies as an operating lease, and as such, therefore not shown on the balance sheet. Unlike the traditional methods of financing, operating and related lease obligations are not capitalized by the lessee, thus, improving balance sheet ratios. Off balance sheet financing/leases are generally footnoted in the notes to financial statements.

Off Balance Sheet Lease

An operating or true lease.

Off-Balance Sheet Loan

A financing treated as a lease for accounting purposes and a loan for tax purposes (i.e. broken lease, see-through lease, synthetic lease, etc.).

Offer

The act of proposing a contract or agreement.

Offer and Acceptance

To propose a contract, and to subsequently accept the proposal (i.e. the process by which a contract is legally developed and/or formed).

Offering

The dissemination of an opportunity to acquire a security (i.e. stocks, bonds, other related investment vehicles).

Offering Circular

A disseminated document disclosing all aspects of an opportunity to acquire a security (i.e. stocks, bonds, or other related investment vehicles).

Offset

A reduction in an amount due to a specific party due to an obligation from one party to another which is used to discount the remaining obligation or total amount due.

Offset Requirements

The terms and conditions that entitle a party to an offset.

Offshore

In any country other than the local one. Offshore does not have to mean across a body of water.

Offshore Corporation

A corporation domiciled in any country other than the local one.

Offshore Operations

The day-to-day business activities of a company conducted abroad or “offshore”.

On Account

Delivery of a good or service with a promise to pay in the future (i.e. an unsecured grant of credit).

One-Hundred Percent Financing (100%)

Financing of the total cost of the equipment without a down payment, and may often even include the aggregate costs of both shipping and handling.

One-Off Lessor

A lessor who infrequently leases, typically only doing an occasional lease near the end of its fiscal year and primarily for tax reduction purposes. A one-off lessor is most often not truly engaged in the business of leasing.

One-Way Open-End Lease

A lease transaction in which the lessee guarantees the residual value of the equipment at the end of the lease but, unlike full open-end leases, does not share in any applicable appreciation of the equipment (i.e. partial open-end leases, half-way open–end leases). The lease is referred to as open-end due to the fact that the lessee does not know its actual cost until the equipment is sold at the end of the lease term. Typically, the end of lease fair market value of the equipment is estimated at lease inception, and upon the conclusion of the lease, the actual value is then determined by either physical appraisal or sale. If the equipment is deemed worth less than originally estimated, the lessee is liable for the deficiency, but if the equipment is worth more, the excess belongs to the lessor. The lessee may or may not have an option to purchase

Open Account

Short term, unsecured credit extended by a business to a customer

Open-End Lease

A lease transaction in which the lessee guarantees the residual value of the equipment and also shares in any applicable appreciation of the equipment. Typically, the end of lease fair market value of the equipment is estimated at lease inception, and upon the conclusion of the lease, the actual value is then determined by either physical appraisal or sale. If the equipment is deemed worth less than originally estimated, the lessee is liable for the deficiency, but if the equipment is worth more, the excess belongs to the lessee. The lessee may or may not have an option to purchase

Operating Budget

A budget that projects sales and related expenses for purposes of making day-to-day business decisions.

Operating Expense

Expenses incurred in the conduct of the regular business activity, excluding any extraordinary items.

Operating Income

Net sales plus other income from regular business activities, excluding gains of any extraordinary items.

Operating Lease

1). A lease typically not required to be identified on the balance sheet of a lessee. (2). A lease that the lessor provides service and maintenance for the leased equipment (i.e. gross lease, service lease, maintenance lease). (3). Any lease that is not considered a capital lease, and is typically utilized for short-term equipment leasing situations, whereby the lessee can acquire the use of equipment for just a fraction of the useful life of the asset. (4) From a financial reporting perspective, a lease that has the characteristics of a usage agreement and also meets certain criteria established by the FASB. Such a lease is not required to be shown on the balance sheet of the lessee. The term is also used to refer to leases in which the lessor has taken a significant residual portion in the lease pricing and, therefore, must salvage the equipment for a certain value at the end of the lease term in order to earn its rate of return. The criteria for meeting FASB 13 classification of an operating lease are: (1). Title for the equipment does not automatically transfer to the lessee during, or by the end of, the lease term. (2). There is no bargain purchase price. (3). The noncancellable lease term is less than 75% of the asset's economic life. (4). The present value of the minimum lease payments, discounted at the lessor's interest rate implicit in the lease, is lesser than 90% of the leased asset's FMV.

Operating Loss

The situation of expenses from the regular business activity exceeding the income from the same activities.

Opportunity cost

The economic/monetary forfeiture arising from pursuing one particular course of action versus another.

Optimization Model

A mathematical program that sets the best of a specified value within the scope of the constraints built into a specific model (i.e. a model that optimizes the debt structure in a leveraged lease).

Option

The right, but not necessarily the duty, to act in a certain manner (e.g. leasing - purchase and/or renewal options).

Option to Purchase

A right to purchase property at a future date, and often times at a predetermined price (i.e. a call, lease purchase option, etc.).

Option to Renew

A right given to a lessee to extend a lease term beyond its scheduled conclusion. Renewals are often on an annual, quarterly or monthly basis, but regardless of the length of the original lease term, a series of renewal options is highly possible.

Oral Contract

A verbal contract that is not evidenced in any way by a written contract. The enforcement of an oral contract is most often severely limited by the statute of frauds, practical considerations and other related regulatory statutes.

Order For Relief

(U.S. bankruptcy based) The legal resulting consequence of filing a bankruptcy petition.

Ordering Costs

All respective costs associated with issuing a purchase order.

Ordinary and Necessary Business Expense

(U.S. tax based): The standard for determining whether an item of expense is deductible for federal income tax purposes.

Organization of Islamic Conference

An economic development organization comprising 57 Islamic oriented member countries.

Organizational Costs

All associated costs incurred in the initial set-up of a new business

Original Cost

The cost of an asset at the time it is first acquired, and often includes such additional costs as shipping, delivery, installation and other related costs incurred in obtaining the asset.

Origination

The process of developing a lease contract, from the initial sales contact to closing, with documentation and funding

Origination Fees

Fees paid to a party for referral or brokering of a transaction (i.e. a finder's or referral fee).

OTC

Acronym for over-the-counter (i.e. relating to the stock market; a specific stock exchange).

Outflows

Cash paid out and/or expenses.

Outstanding Check

A check issued, but not yet cleared by a bank. Outstanding checks generate float, which often provides a very short-term loan to a business, and a modest to relatively significant increase in working capital.

Outstanding Stock

Company stock actually issued to shareholders, excluding any stock held by the company itself.

Overdraft

A check or other draft drawn on an account without sufficient funds to cover the draft.

Overdraft Protection

An agreement by a bank or other financial institution to honor checks and drafts even when there are insufficient funds in a customer's account to cover them at the time they are presented.

Over-Extended

The situation of having borrowed too heavily, spent too much and otherwise having excessively utilized readily available financial resources. This situation is particularly relevant for companies utilizing the cash flow basis of accounting

Overhead

The fixed and variable expenses of operating a business

Over-The-Counter Market (OTC)

A securities market without a physical trading space; over-the-counter markets operate by telephone or, with ever-increasing frequency, electronically through computer networks.

Owner

A party or parties holding title (legal owner) or equity interest (economic owner) in an asset.

Owner Participant

A party who contributes equity in a leveraged lease transaction.

Owner Trustee

The party who represents the equity participants in a leveraged lease.