Question 1
No, the naysayers/critics are incorrect about the acquisition and its effect on the firm's return on equity. First, the current losses being experienced at the potential high-tech company have not been attributed to the type of product they are offering. Since my firm is currently performing well with the same products and market, means that acquisition will reduce market competition and increase our firm's total productivity. Return on equity (ROE) is a measure of productivity in business calculate by dividing the firm's net income with the shareholder's equity i.e. assets-debt ( Trkman, 2010) . Therefore acquisition will increase productivity through increased assets. Also, my organizations' business strategy is currently profitable i.e. has a high return on equity and will continue to increase even after the acquisition of the smaller company.
High-tech companies have a high potential of profitability and return if well adopted under excellent environments and strategies. ROE changes must be considered in acquisition as they affect the total productivity (Howson, 2016). Therefore aspects of return on equity such as the value of assets of the organization being acquired reflect the total asset turnover essential in calculating viability and comparing against competitors in the market.
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Question 2
The additional amount required by the chief financial officer is set to balance the equation above the $1.2 million funding required. Available finances for the project is calculated by summing up cash and securities which adds up to $1.1million. Therefore, the project is $100,000 deficient in operations without considering other transactional requirements. She makes the assessment to ensure that the business is well planned and controlled in providing financial characteristics of the organization i.e. bonds and projected profitability. She also assesses to ensure that the budget of the company is sufficient and available (Hisrich & Ramadani, 2017). The assessment also ensures enhanced understanding of accounting estimates, promotes lending in cases of financial need and ensures efficient planning and business control (Raviv, Thompson, Gresh & Hennessy, 2017).
References
Hisrich, R. D., & Ramadani, V. (2017). Entrepreneurial Business Planning. Effective Entrepreneurial Management (pp. 17-32). Springer, Cham.
Howson, P. (2016). Commercial due diligence: the key to understanding value in an acquisition . Routledge.
Raviv, A., Thompson, T., Gresh, P., & Hennessy, S. (2017). Bed Bath & Beyond: The Capital Structure Decision. Kellogg School of Management Cases , 1-14.
Trkman, P. (2010). The critical success factors of business process management. International journal of information management , 30 (2), 125-134.
