Wealth Maximization Concepts Worksheet
|Concept |Application of Concept in the Scenario |Reference to Concept in Reading |
|Measuring wealth |Anne Lorale, CFO of Lester Electronics, will need a method to determine the |“the most important item that can be |
|maximization |best course of action to maximize returns on shareholder investments. |extracted from financial statements |
| |Evaluating financial measures of perspective partners like balance sheets, |is the actual cash flow of the firm. |
| |income statements and cash flow statements will allow Anne to determine the |… This statement helps to explain the|
| |best companies to align with to maximize return on investment. Balance |change in accounting cash and |
| |sheets provide measures of what the company owns in assets as well as what |equivalents” (Ross, Westerfield, & |
| |the company owes through financing and will help Anne determine the working |Jaffe, 2005, p. 26) |
| |capital the company has available to develop the products that Lester is able| |
| |to distribute. Income statements provide a measure of profitability of the |“The balance sheet states what the |
| |company. A company that has more revenue than expenditures is profitable. |firm owns and how it is financed |
| |The more profitable, the easier it will be for a company to attract investors|“(Ross et al., 2005, p. 21) |
| |to grow the company. Cash flow measures the amount of money that is coming | |
| |into and out of a company. Cash flow...