Alliance Concrete
Alliance Concrete Case Analysis
Executive Summary:
This report provides an analysis and evaluation of the current and forecasted profitability, liquidity and financial stability of Alliance Concrete. Methods of analysis include forecasting the income statement and balance sheet to calculate financial ratios and profitability ratios. The key drivers for the income statement was management’s assumption about the sales environment surrounding Alliance Concrete. All calculations can be found on the attached document. Results of data analyzed show that Alliance Concrete is experiencing sales decline, profitability decline, but is relatively financially stable for the most part. The report finds the prospects of the company in its current position are not positive. The major area of weakness revolve around obtaining external financing. Our recommendation discussed involves making capital investments, making the dividend payment to National, and obtaining the essential additional funding from the bank by renegotiating terms with them.
Problem Recognition:
Alliance must choose either between making the principal repayment to the bank, making capital investments or making the dividend payment to National. In other words, Alliance’s recent success and clear signs of continued growth were not sufficient enough for the necessary capital improvements, bank obligations and expected divided payment to National. With rising increase in cement costs, the tremendous growth of China’s infrastructure isn’t enough to keep other costs down. Costs of energy prices had increased the cost of manufacturing cement and ocean shipping costs, rail disruptions and port congestion had caused widespread shortages even though there were other internal sources which then caused the share of import cement to rise by 2.3% YoY.
Lastly, the cost of cement was 11% higher YoY according to the U.S. Labor Dept. Producer Price Index and the biggest factor responsible for the rise in price was the
Executive Summary:
This report provides an analysis and evaluation of the current and forecasted profitability, liquidity and financial stability of Alliance Concrete. Methods of analysis include forecasting the income statement and balance sheet to calculate financial ratios and profitability ratios. The key drivers for the income statement was management’s assumption about the sales environment surrounding Alliance Concrete. All calculations can be found on the attached document. Results of data analyzed show that Alliance Concrete is experiencing sales decline, profitability decline, but is relatively financially stable for the most part. The report finds the prospects of the company in its current position are not positive. The major area of weakness revolve around obtaining external financing. Our recommendation discussed involves making capital investments, making the dividend payment to National, and obtaining the essential additional funding from the bank by renegotiating terms with them.
Problem Recognition:
Alliance must choose either between making the principal repayment to the bank, making capital investments or making the dividend payment to National. In other words, Alliance’s recent success and clear signs of continued growth were not sufficient enough for the necessary capital improvements, bank obligations and expected divided payment to National. With rising increase in cement costs, the tremendous growth of China’s infrastructure isn’t enough to keep other costs down. Costs of energy prices had increased the cost of manufacturing cement and ocean shipping costs, rail disruptions and port congestion had caused widespread shortages even though there were other internal sources which then caused the share of import cement to rise by 2.3% YoY.
Lastly, the cost of cement was 11% higher YoY according to the U.S. Labor Dept. Producer Price Index and the biggest factor responsible for the rise in price was the