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Concept Application of Concept in the Scenario Reference to Concept in Reading
Metrics of wealth maximization
The metrics of wealth maximization are: the balance sheet, the income statement, net working capital, financial cash flow, and the accounting statement of cash flows, (Ross, Westerfield, & Jaffe, 2005). These measures are important not only to organizational stakeholders at Lester Electronics and Shang-wa, but also to industry competitors who are currently looking at a possible merger with these two organizations.
Additionally, LEI and Shang-wa have been in business together for over 35 years and are toying with the idea of a joint venture that could strengthen both companies within the industry and remove them from a potential acquisition. A review of wealth maximization metrics would help determine the merits of such an agreement.
Financial statements help to evaluate how well a firm is doing. This is especially important when it comes to matters of mergers and acquisitions. The five key areas of financial performance that can be determine from the metrics of wealth maximization are: financial leverage (the extent to which a firm relies on debt financing), short-term solvency (the ability of the firm to meet its immediate obligations), profitability (the extent to which a firm is profitable), activity (the ability of the firm to control its investment in assets), and value (the value of the firm), (Ross, et al., 2005).
Operating exposure
A joint venture with Shang-wa will open up new opportunities for LEI. However, LEI has never marketed domestically made products outs ...