Wealth Maximization Concepts Worksheet
Wealth Maximization Concepts Worksheet
Concept Application of Concept in the Scenario Reference to Concept in Reading
The corporate Firm: The Partnership Bernard Lester of Lester Electronics, Inc. (LEI) and Shang Wa Electronics (SWE) CEO John Lin from Korea started an agreement in 1978. SWE is a capacitor manufacturer with a more reasonable business proposal and LEI added additional components to its product line, and made inroads with two large domestic manufacturers that use capacitors in both consumer and industrial products. For the past 35 years, the agreement which must be renewed annually and has served both companies very well, and John and Bernard now consider themselves friends as well as business partners (University of Phoenix Scenario One, 2008). The firm is a way of organizing the economic activity of many individuals, and there are many reasons why so much economic activity is carried out by firms and not by individuals. A basic problem of the firm is how to raise cash. The corporate form of business, that is, organizing the firm as a corporation, is the standard method for solving problems encountered in raising large amounts of cash (Ross, Westerfield & Jaffe, 2004)
The Balance Sheet Bernard Lester and John Lin have been doing business together for a long time. Both companies are well aware of each other’s financial status and market stature. However, both companies also realize the importance to review financial documents before making important company decision. As a result Bernard Lester has requested for Shang Wa’s recent capital budget and other financial statements before making the decision about the joint venture (University of Phoenix Scenario One, 2008). The balance sheet is an accountant’s snapshot of the firm’s accounting value on a particular date, as though the firm stood momentarily still. The balance sheet has two sides: On the left are the assets and on the right are the liabilities and stockholders’...
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