Enager Industries, Inc. (“Enager”) is a young company with three major divisions: Consumer Products, Industrial Products, and Professional Services. The oldest division is Consumer Products and it designs, manufactures, and markets household items that are primarily used in the kitchen. The Industrial Products division manufactures one of a kind tools that are made to order that meet a company’s required specifications. Lastly, the Professional Services division provides land planning, landscape and structural architect, and an engineer-consulting firm. The divisions were looked upon as individual companies; however, any new project proposal that required investment in excess of $1,500,000 had to be reviewed by the chief financial officer, Henry Hubbard.
Because of the uniqueness of products and services produced by each division individually, Enager is considered a conglomerate as defined by the online dictionary Allbusiness.com. In his book “Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor,” David Scott (2003) claims that a conglomeration is “designed to have reduced risk.” Additionally he further writes, “It is possible for a conglomeration to redistribute its corporate assets depending on which operations show the best promise.” The creation of conglomerates in the United States was very popular in the 1960s and then again in the 1990s.
The early 1990s saw a recession that was caused by many different financial stimuli. For example, in October 1987, Black Monday caused a stock market collapse that resulted in the Dow Jones Industrial Average losing 22.6 percent. Although the economy bounced back, long-term effects such as the collapse of the savings and loans institutions took hol...
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...valuation centering on ROA, was not a proper move.
AllBusiness.com, s.v. “Conglomerate.” http://www.allbusiness.com/glossaries/conglom
erate/4957187-1.html, accessed April 2011.
Bancroft Library. 2011. "1990-92 Early 1990s Recession.” University of California,
accessed April 2011.
Kennon, Joshua. 2006. "Profit Center - A Basic Understanding of the Business Term Profit Center." About.com. http://beginnersinvest.about.com/od/investingglossary/ a/profit_center.htm, accessed April 2011.
Scott, David. Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor. 3rd. Boston: Houghton Mifflin Harcourt, 2003.
Thomas, Joe. 2004. "Diversification Strategy." Encyclopedia for Business. 2nd ed., http://www.referenceforbusiness.com, accessed April 2011.
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