Charles Bert is a successful Canadian businessman. For the past 15 years, he has been president of Bert-Ram Electronics Ltd., a company he started with Peter Ramper. Ramper, who is not employed by the company, obtained shares in the company in exchange for patent rights on one of his inventions.
For many years, Bert-Ram suffered the typical growing pains of a new business, including cash-flow shortages. In the past few years, however, the company has generated substantial profits as well as cash flow in excess of expansion requirements.
Bert is not a €œhigh liver,€ and his annual salary is sufficient to meet his personal needs.
Realco Corporation owns two rental properties and generates rental income of $130,000 annually. Bert owns 25% of the common shares of Realco; the remaining shares are owned 25% by each of three other investors.
Bert currently has a net worth of $1,500,000, as follows:

In 20X1, Bert-Ram earned an after-tax profit from business of $500,000, of which only $100,000 was required for business expansion. The company currently has $250,000 of cash invested in bank term deposits. Bert and Ramper recently argued about how to invest this cash€”Ramper is keen on the stock market, while Bert prefers real estate investments.
Bert€™s personal income for 20X1 consists of the following:

Recently, Bert was given the opportunity to purchase 100% of the common shares of LOBD Software Ltd., a Canadian software wholesaler. The company generates profits of $100,000 after tax and has a strong management team that could run the business without a significant time commitment from Bert. The asking price for the shares is $600,000 cash. The most recent balance sheet of LOBD is shown on the next page.
Bert has decided to purchase the LOBD shares, and his bank has agreed to finance the full $600,000 purchase price. Bert will use his bonds and shares of Bert-Ram as collateral for the loan. The bank requires that at least $80,000 of the loan principal be repaid each year in addition to interest.
Required:
Review Bert€™s financial structure and outline what steps he can take to maximize his net worth in the future.

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Personal assets Common shares of Bert-Ram (75% of the $ 300,000 common shares Bonds Common shares of Realco 800,000 200,000 200 Salary (Bert-Ram) nterest Dividends $100,000 15,000 Bert-Ram 50,000 15,000 LOBD SOFTWARE LTD Balance Sheet May 31, 20X1 Assets Current assets (cash, receivables, and inventory) $565,000 Fixed assets (at cost) Vehicles Equipment 60,000 110,000 170,000 Accumulated amortization (65,000 105.000 Investment in long-term bonds 100,000 $770,000 Liabilities Accounts payable Income taxes payable $350,000 20,000 370,000 Shareholder's equity: $10,000 Share capital Retained earnings 390,000 400,000 $770.000