Alliance Concrete Essay

1104 WordsOct 21, 20145 Pages
As Alliance’s decision makers, we need to decide if we should make the principal repayment to the bank, make capital investments, or make the dividend payment to National. To obtain another loan from the bank, we must first repay a portion of the original loan from the bank. With our plant, property, and fixed assets exceeding $100 million for the first time in company history, we decided to not to make additional capital investments. We have the necessary fixed assets, and we are currently trying to keep costs to a minimum, so making capital investments would be unwarranted. Our new parent company, National, wants us to make a $3 million dividend payment. At the same time, management wants to continue to grow while keeping costs low, and making a $3 million payment that brings little in return would be counterproductive. After reviewing our past financial statements and forecasting next year’s projections, we recommend making the principle repayment back to the bank, and skipping the dividend payment. Based on our projections, Alliance would benefit from repaying the bank’s principal payment and skipping the dividend payment. The first time we ran through our projections, we incorporated the $3 million dividend payment to National into our financial statements. We did not consider any additional capital expenditures in our projections due to the fact that we have a substantial amount of fixed assets well over 100 million for the first time in company history. The Financial Projections - No Dividend Payout worksheet, which we recommend, does not incorporate the $3 million dividend payment in our projected balance sheet. By skipping the dividend payment, we can use that allotted money to pay off some of our debt, reducing our long-term debt by $3 million to $63.146 million. Since we did not factor in the $3 million into our net income, our change in retained earnings

More about Alliance Concrete Essay

Open Document