Understanding the Strategic Role of Financial Statements through a Case Study on Corporate Mergers

Marcello Sequeira

Abstract: This article examines the critical role of financial statements in strategic decision-making, particularly within the context of mergers and acquisitions. Through the lens of a case study involving the all-stock merger of Washington H. Soul Pattinson and Milton Corporation, the paper highlights how an understanding of balance sheets, income statements, and cash flow reports can inform value-based decisions. It presents evidence of shareholder value creation by leveraging overvalued stock, and improved liquidity post-merger. The study underscores the necessity of financial literacy and accurate valuation to drive informed business strategy.

Keywords: financial statements, strategic decision making, balance sheet, shareholder value, mergers and acquisitions