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Maximizing shareholder wealth strategies
Wealth maximization addressing shareholder and managers goal
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Wealth Maximization Concepts Worksheet
Maximizing Shareholder Wealth- MBA/540r4
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.”
(Ross, et al, 2004 p. 13).
Definitions of Wealth Maximization
John Lin, founder and CEO of Shang-wa Electronics at age 68, John looks forward to spending less time on business and more time with his grandchildren while they are still young. John has never groomed a successor and without one, the business cannot afford for him to slow down. With one son a doctor and the other a commercial architect, John has begun to explore other options that might afford him retirement.
The sole proprietorship represents single person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs(Block & Hirt, 2005). The Sole Proprietorship
“A sole proprietorship is a business owned by one person, and is the cheapest business to form. No formal charter is required, and few government regulations must be satisfied for most industries. A sole proprietorship pays no corporate income taxes. All profits of the business are taxed as individual income. The sole proprietorship has unlimited liability for business debts and obligations. No distinction is made between personal and business assets.
The life of the sole proprietorship is limited by the life of the sole proprietor. Because the only money invested in the firm is the proprietor’s, the equity money that can be raised by the sole proprietor is limited to the proprietor’s personal wealth” (Ross, et al,2004 p.
Corporation – “A business organization that exists as a legal entity and provides limited liability to its owners.” (Longenecker, Petty, Palich, Hoy, Pg. 205) The main advantage of a corporation is that the business liability falls onto this entity instead of the individuals that own it. The disadvantages of this organization are found mostly in its formation. A corporation is expensive to create and requires compliance with state
A corporate owner is an Individual or entity who owns a business entity to profit from the successful operations of the company. Generally, has decision making abilities and first right to
This means that those who invest capital cannot be found liable for more than they have ventured; should the company fail or be sued. This also means that corporations can be afforded similar rights and obligations as those enjoyed by groups of persons. These include ability to contract and enforce contracts, to own property, to sue and be sued under both criminal and civil laws. And further that corporations can be continued in perpetuity with shares and control transferred accordingly. Ultimately corporations are provided rights and given respect similar to persons. As such, it is completely reasonable in my view for employees to feel loyalty and respect for the organization and place of their daily work; in addition to the loyalty they feel toward their fellow coworkers. This is the natural basis of the collective sense of loyalty. And why I must agree with James Roche of General Motors, and view whistle-blowers as disloyal and detrimental to work place cohesion and
According to Mallor, Barnes, Bowers, & Langvardt (2010) “modern corporation law emerged only in the last 200 years, ancestors of the modern corporation existed in the times of Hammurabi, ancient Greece, and the Roman Empire. As early as 1248 in France, privileges of incorporation were given to mercantile ventures to encourage investment for the benefit of society. In England, the corporate form was used extensively before the 16th century. In the late 18th century, general incorporation statutes emerged in the United States” (p. 1009).
So, what exactly is a corporation’s responsibility? Much will depend on who you’re talking to, but
A corporation was originally designed to allow for the forming of a group to get a single project done, after which it would be disbanded. At the end of the Civil War, the 14th amendment was passed in order to protect the rights of former slaves. At this point, corporate lawyers worked to define a corporation as a “person,” granting them the right to life, liberty and property. Ever since this distinction was made, corporations have become bigger and bigger, controlling many aspects of the economy and the lives of Americans. Corporations are not good for America because they outsource jobs, they lie and deceive, and they knowingly make and sell products that can harm people and animals, all in order to raise profits.
Corporate governance implies governing a company/organization by a set of rules, principles, systems and processes. It guides the company about how to achieve its vision in a way that benefits the company and provides long-term benefits to its stakeholders. In the corporate business context, stake-holders comprise board of directors, management, employees and with the rising awareness about Corporate Social Responsibility; it includes shareholders and society as well. The principles which...
There are many different types of business structures, but if you own and operate a business that it is a sole
A Sole Trader is a business that is owned by only 1 person. They are
In effect Salomon's principle as confirmed by Macaura v Northern Assurance Co. and Lee v Lee's Air Farming Ltd. helps form an image of a corporation as a 'depersonalised conception'[5], an object that is 'cleansed and emptied of its shareholders. '[6] Yet the concept of an incorporated company as a separate legal person causes some difficulties, for surely all 'legal personality is in a sense fiction'.[7] Questions soon arise ... ... middle of paper ... ...
Finally I will state whether or not I agree with the given statement.cobd bdr sebdbdw orbd bdk inbd fobd bd. When a company receives a certificate of incorporation it has a 'separate legal personality'. In law the company becomes a legal person it its own right. The fundamental concept to become familiar with when starting up a business is the idea that the business has a legal personality in its own right, particularly when it assumes the form of a limited liability company. This essentially means that if one commences business as a limited liability company, then the corporation... ...
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.
It is known that corporations play a large part in making the world go around. Many times we read, hear or see stories on companies and why something was done a certain way. The film “The Corporation” has given a whole new insight to not only how businesses operate but what motivates them and their decisions that they make to keep their businesses thriving.
There are many advantages and disadvantages when owning your own business. When you own you own business, it’s known as a sole proprietorship. But with any type of business, there will always be advantages and disadvantages.
In corporate law a company is considered to be a separate legal entity. The law sees the company as being separate from those who manage it. According to the law a company owns its own properties. The companies properties do not belong to the owners and those who manage it, which makes it a separate legal entity from its owners. Therefore if a corporation is considered to be it’s own separate person whenever it is involved in any legal action. According to an online business dictionary, separate leg...