Definition:

The Current Portfolio of Leases refers to the collection of all lease agreements that a company currently holds. This includes both operating and finance leases that are active and have not yet expired or been terminated. It represents the total value of lease obligations that a company is responsible for at a given point in time.

Examples

1. A retail company with multiple store locations may have a current portfolio of leases that includes the rental agreements for each store.
2. An airline might have a current portfolio of leases that includes the leasing agreements for its aircraft fleet.

Formula:

There isn't a specific formula for the Current Portfolio of Leases, as it is more of a collection of data rather than a calculated metric. However, it can be summarized as:

Total Lease Obligations = Sum of all active lease agreements

How to use the metric:

The Current Portfolio of Leases is used to assess a company's lease obligations and financial commitments. It helps in understanding the company's operational leverage and potential risks associated with lease liabilities. Analysts and investors may use this information to evaluate the company's financial health and liquidity.

Limitations:

1. It does not provide insights into the terms and conditions of each lease, which can vary significantly.
2. It may not reflect future changes in lease agreements, such as renewals or terminations.
3. It does not account for the potential impact of lease liabilities on cash flow and profitability.

Applies to:

Industries with significant leasing activities, such as retail, aviation, real estate, and transportation, where leasing is a common practice for acquiring assets.

Doesn't apply to:

Industries where leasing is not a prevalent practice, such as technology or pharmaceuticals, where companies may own most of their assets rather than lease them.

Summary:

The Current Portfolio of Leases is a snapshot of a company's active lease agreements, providing insight into its lease obligations and financial commitments. While it is useful for assessing operational leverage and risk, it has limitations in terms of detail and future projections. It is most applicable in industries where leasing is a significant part of business operations.