Alliance Concrete Case Analysis Essay

The best estimate for 2006 are shown in the projections for alignment Concrete. The c completelyer-out is expected to grow its Net Income by $2,350 million. If the c each(prenominal)er-out was to founder $3 million in dividends, it would be $11,349 million in retained earnings. If you film no enthronisation in capital expenditure and make payments to your bank loan, the loan would come down to $57,660 million. If the confederation does non re habilitate, it exit be at a 50% chance of a line of work occurring, which can cause more than losses. Just as they did in 2004, non only did it cost $2.6 million to fix the line of work but in addition the follow had to close down for 2 weeks, hence the drop in sales for 2004. My recommendation to Alliance Concrete would be to pay impinge on the $7,000 million obligation to the bank which is owed. This would be suggested so you do not default on a loan. It would also put you at the acceptation limit as well. If the company do es default on the loan, it impart not be a good look for the company. Stock prices and confidence in the company will drop, as people will think that the company cannot pay its bill.After paying off the debt to the bank, I would suggest to portion the rest of the money towards capital expenditure. It will be necessary for the company to upgrade at least some of the equipment to lower the possibility of something red ink bad. It would be a total nightmare if the company ran into another problem like the one they faced in 2004, and it may lead to bankruptcy. They may not be able to recover because their debt would go through the roof. That be said, I would cross on the dividend payments and insure that the following year on that point will be a bigger payment to the stockholder, if everything goes well. The investment into the company would make the company operate better and may even break more revenue.If I was to renegotiate with the bank, I would put earlier the projectio n of growth. I would highlight the increase in sales and revenue on with showing the effort to pay down the banks loans. I would put forward the current and quick ratio, showing that we have enough money to cop the assets to cover our debt in worst case scenario. The company can postulate that, even though the real estate market is slowing down, the company is still showing growth, which is a good sign.If Alliance Concrete was to skip on dividend payments the argument that can be put forth would be that the company is growing and shows signs of great improvement, if we put money into it now. Also that, investment now in the company could mean even more dividend payments in the future. We could also argue that it needs to be skipped because the company needs to put back money into itself because we need to seduce repairs done. If we pay dividends now, it may not be the best for the company, because we will not be able to get the repairs done that are needed and will cost us m ore to fix and recover from that problem.After carefully looking at all aspects and possible situations I would suggest that the company skip on the dividends for this year, and invest its money back into the company along with paying of some of the debt. This will be beneficial for all. It will make the company grow all with paying of its loans. The stockholders can be assured that the company is growing and that there will be better dividend payments in the future.