This interest-free loan from the government shows up as a liability on your balance sheet in an account called “deferred income taxes payable.” There is a very helpful feature of deferred taxes for growing companies if they have an ongoing capital-expenditure pattern that also grows: Their new capital expenditures are typically getting larger, so the interest-free loan keeps getting larger in proportion. This works even though the rate of growth is being moderated by averaging in with older assets, gradually forcing the company into playing some degree of tax payment catch-up with the IRS. The happy result of all this for growing companies whose Capex is also growing is that deferred taxes become an ongoing source of essentially free capital. Once again, an increase in a liability
account is counted as cash in.

Leasing & Capex
In evaluating capital-expenditure options, companies frequently find leasing to be a better deal than buying. A good part of the economic benefit of leasing is attributable to the fact that leasing companies often have more buying leverage, more income to shelter from taxes and a higher tax
rate than their customers do. The result is that some of this greater net advantage is passed along to the company that elects to lease rather than buy. As discussed in Chapter 4, you might be able to keep balance-sheet debt lower by leasing. The determination involves many detailed IRS distinctions, but all are rooted essentially in whether the lessor or the lessee bears the primary risks of ownership. Financing-type leases must have the present value of scheduled lease payments shown as a liability on the balance sheet. But operating leases do not have to be reported on the face of the balance sheet.

Taken From : Cash Rules