Wealth Maximization Concepts Worksheet
University of Phoenix
August 8, 2008
Maximizing Shareholder Wealth- MBA/540r4
Wealth Maximization Concepts Worksheet
Concept Application of Concept in the Scenario Reference to Concept in Reading
Definitions of Wealth Maximization
Bernard Lester is CEO and founder of Lester Electronics the public Lester Electronics, Inc. which earns $500 million annually. In 1984, Bernard took his company public, and it is now traded on the NASDAQ market and rated Baa by a nationally recognized rating agency.
A corporation is owned by shareholders who share the privilege of limited liability and whose liability exposure is usually no greater than their initial investment.
A corporation has a continued life and is not dependent on any one shareholder for
maintaining its legal existence. A key feature of the corporation is the easy divisibility of the ownership interest by issuing shares of stock(Block & Hirt, 2005)
Discuss definitions of wealth maximization (Ross Ch. 1)
The corporate firm
The Corporation
“Of the many forms of business enterprises, the corporation is by far the most important. It is a distinct legal entity. As such, a corporation can have a name and enjoy many of the legal powers of natural persons. For example, corporations can acquire and exchange property.
Corporations can enter into contracts and may sue and be sued. For jurisdictional purposes,
the corporation is a citizen of its state of incorporation. (It cannot vote, however.). Starting a corporation is more complicated than starting a proprietorship or partnership.”
(Ro ...