El-Con Construction Inc Case Study Example | Topics and Well Written Essays - 1000 words

El-Con Construction Inc - Case Study ExampleRob Lister, the CEO of Oakville Hydo though that El-Con was qualified for the impart based on its recent performance though he did not know if granting the loan was in the best interest of Oakville Hydro fraternity. Based on the company previous performance, on that point are several ways in which it could maximize and hone its shareholders wealth. It is therefore recommendable for El-Con to seek different ways of maximizing the shareholders wealth before settling on the best. The best ways or strategies to optimize owners wealth is by ensuring continuous cash flow in the company. Different scenarios on which the firm can optimize its shareholders wealth leave be discussed. The different scenarios for considerations include initial in the public eye(predicate) offering and investing its excess funds to maximize profit, obtain a loan to obtain the required funds-Building credit and Shareholder wealth. 1. Initial public offering and inv esting its excess funds to maximize profit The company should hold initial public offerings and sell them as common stock to the public. Based on the previous performance, the company can thrive well without the common stock moreover should go for it in order to obtain enough funds to tend to all of its constructions needs. The use of initial public offering will help in profit maximization. Initial public offering will help the company to expand its investments as it will provide the company with enough liquidity. Liquidity ratios 2009 2008 2007 accredited ratio 2.8 2.73 3.38 Acid test 2.31 1.72 1.75 Working capital 2.8 2.7 3.4 The current ratio and acid test of the company for the three old age was more than 1 which agent that the company was in a better position to cater for its liabilities and obligations using its assets. Working capital measures the efficiency of as well as its short endpoint financial health. The ratio determines whether the company has enough short term assets to whirligig its short term debts. The working capital ratio for the company for the three years is more than 2 which means that the company was not investing in its excess assets and its lack of enough funds can be attributed to that. This means that the company is in a better financial position since its assets outweighs the liabilities and should invest its excess assets to earn income. The company should choose to invest in mutual funds, real retention or even insurance products. This will earn the company interest. Investing the excess assets will be a good way for maximizing income by the company which would then earn the company enough capital for the required machinery. Using initial public offering and investing its excess funds will be of help to El-Con as it will help the company to acquire the required liquidity for it to acquire the required machines. The required amount of $450,000 for hydrovac truck and $50,000 to cover its working capital needs is a small a mount for the company judging from the past performance and could therefore be acquired by initial public offering and investing in excess assets. 2. Obtain a loan to obtain the required funds-Building credit Obtaining a loan like the loan put across from Oakville Hydro could another good way of maximizing the shareholders wealth. Building credit is a deliberate and a planned borrowing which is aimed at increasing the reputation of a firm in the lending market and granting it a larger access to large sums of capital. This greater access of money helps the company in financing stronger enlargement and allows it to generate real wealth. The working capital of El-Con for the three years indicates that the current assets are more than the current liabilities which means that it does not have any problems salaried for its obligations. As a result, building credit by borrowing