Wealth Maximization Concepts

Wealth Maximization Concepts Worksheet

Concept Application of Concept in the Scenario Reference to Concept in Reading

Sole Proprietorship

Shang-wa Electronics is a sole proprietorship. John Lin started the business and built it up over the years. Lin is the only owner of Shang-wa Electronics. A business owned by one person is a sole proprietorship (Ross & Jaffe, 2004).

Capital Budgeting

Bernard Lester, CEO of Lester Electronics, Inc., emails John Lin, CEO of Shang-wa Electronics, and requests a capital budget for the joint venture manufacturing facility the two have discussed opening. This information will help Bernard Lester determine if this joint venture will be profitable in the future before he commits to the deal.

Capital budgeting is the process of determining what long-term assets a firm should be investing in for the future (Ross & Jaffe, 2004).

Accounting /Financial Statements

Bernard Lester, CEO of Lester Electronics, Inc., emails John Lin, CEO of Shang-wa Electronics, and requests Shang-wa’s recent financial statements. This information will help Bernard Lester determine if the joint venture manufacturing facility the two have discussed will be profitable in the future before he commits to the deal. The accounting/financial statements include the balance sheet, income statement, and the statement of cash flow. These statements show a company’s financial picture or value in time (Ross & Jaffe, 2004).

Growth Opportunities

In the past two Board meetings for Lester Electronics, Shang-wa’s CEO, John Lin, has suggested that Shang-wa is in