The main focus of this article is upon lease financing. There are three types of financing. These are effects on financial statements, Lessee?s analysis and Lessor?s analysis. It has also been observed that Operating Leases usually provide maintenance service. They are not fully amortized and often contain a cancellation cause. If an asset is leased and the lease is not a capital lease, then the lease will not be shown on the balance sheet. It will be in the footnotes. As a result, financial ratios may not be comparable between a firm that leases and one that does not. Leasing is a substitute for debt financing. Thus, leasing uses up a firm?s debt capacity.