Case Study 3
Case study 3
Lafarge-Aget Heracles Case
a. Use Exhibits H and I, estimate and evaluate ratios for ROI, Profitability, liquidity, and financial strength.
ROI is 5.18 in 2003 and 5.42 in 2004. It is slightly increase. The investment gains high profit to investment cost. Compared to 2003, the net income also growth 4.6 percent in 2004 since the mainly part is interest deduction. The sale revenue decreases 3,344 EURO, but the cost has a higher reduction by 4,400 EURO. Thus, its profitability essentially unchanged but still strong. Aget’s quick ratio is 2.4 in 2004 and 1.64 in 2003. Current ratio is 2.97 in 2004 and 2.07 in 2003. From the quick ratio and current ratio, Aget’s liquidity is very good. In 2003, it is nearly the ideal, but in 2004 it may have more cash or other on hand. Aget need to invest more to make more benefits.
b. For 2008, Aget is contemplating adding two new dry-process kilns for an investment of 10.7 million. That investment is expected to increase current capacity by 18%.
1. Assuming the most current operational cost levels, what sales must it generate to recoup the above investment?
In current operational cost levels, it is direct sales. They focus on selling cement or formulating, preparing and delivering ready-mixed concrete. There are little generated by using agents and dealers who sell a broad array of building products sourced from several suppliers.
2. If we assume 2004 prices of 45.91 Euro pmt, what does the new break-even level do to the utilization rate, given its new capacity level? What can you say about its effect upon Aget’s pricing?
If 2004 prices is 45.91 Euro pmt and the investment is 10.7 million Euro, Aget needs sell another more 233,000 metric tons to make up this investment. And adding two new dry-process kilns could raise energy efficiency and productivity, allow the utilization of organic waste for fuel and reduce organic pollutants. Those improvements will reduce costs, so Aget can decrease its price and get the
Lafarge-Aget Heracles Case
a. Use Exhibits H and I, estimate and evaluate ratios for ROI, Profitability, liquidity, and financial strength.
ROI is 5.18 in 2003 and 5.42 in 2004. It is slightly increase. The investment gains high profit to investment cost. Compared to 2003, the net income also growth 4.6 percent in 2004 since the mainly part is interest deduction. The sale revenue decreases 3,344 EURO, but the cost has a higher reduction by 4,400 EURO. Thus, its profitability essentially unchanged but still strong. Aget’s quick ratio is 2.4 in 2004 and 1.64 in 2003. Current ratio is 2.97 in 2004 and 2.07 in 2003. From the quick ratio and current ratio, Aget’s liquidity is very good. In 2003, it is nearly the ideal, but in 2004 it may have more cash or other on hand. Aget need to invest more to make more benefits.
b. For 2008, Aget is contemplating adding two new dry-process kilns for an investment of 10.7 million. That investment is expected to increase current capacity by 18%.
1. Assuming the most current operational cost levels, what sales must it generate to recoup the above investment?
In current operational cost levels, it is direct sales. They focus on selling cement or formulating, preparing and delivering ready-mixed concrete. There are little generated by using agents and dealers who sell a broad array of building products sourced from several suppliers.
2. If we assume 2004 prices of 45.91 Euro pmt, what does the new break-even level do to the utilization rate, given its new capacity level? What can you say about its effect upon Aget’s pricing?
If 2004 prices is 45.91 Euro pmt and the investment is 10.7 million Euro, Aget needs sell another more 233,000 metric tons to make up this investment. And adding two new dry-process kilns could raise energy efficiency and productivity, allow the utilization of organic waste for fuel and reduce organic pollutants. Those improvements will reduce costs, so Aget can decrease its price and get the