Mba 540 Week 1 Cocepts Worksheet
Wealth Maximization Concepts Worksheet
Steven M. Coston
University of Phoenix
Wealth Maximization Concepts Worksheet
Concept Application of Concept in the Scenario Reference to Concept in Reading
The Balance Sheet The Lester Electronics Scenario is full of examples of companies looking at the balance sheet of other companies. The two subject companies have received bids or nothing less than expressed interest in their acquisition by other companies in the market. Companies with good financial standing and good track records of business success by be the target of take-overs by other companies who see success in the bottom line of the targeted company's balance sheet.
A bidding firm would not want to acquire another firm with a poor showing on their balance sheet. The difference in liabilities and assets must produce some residual value.
"The purpose of the firm is to create value for you, the owner" (Jaffe, Ross, and Westerfield CH1, p. 3, 2005)
Net Working Capital Lester Electronics has three possibilities available for execution. Lester can purchase Shang-Wa outright or enter a joint venture with Shang-Wa for the joint use of a capacitor making facility to respond to the increase in market size and demand. In either of the above cases Lester Electronics must determine its Net Working Capital to facilitate such a move. The third option at Lester Electronics is to simply let another firm acquire them. "The change in net working capital is usually positive in a growing firm." (Jaffe, Ross, and Westerfield CH2, p. 26, 2005)
The Income Statement Again it seems that each company in this scenario sees opportunity in the acquisition or partnership with another company. The market is evidently prepared for increased sales of capacitors from the Far East. Avral Electronics is a firm who has a great income statement and is ready for an acquisition of Lester. Avral will...
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