Academy of Economic Studies, Bucharest FABIZ, Master, English Section

S.C. Petrochemicals S.A.

Custura Ruxandra-Gabriela (Group 1)

Table of contents
1. Description of the company.................................................................................................2 1.1 Structure.........................................................................................................................3 1.2 History............................................................................................................................3 2. Banking relationships...........................................................................................................3 2.1 Credit history.................................................................................................................4 2.2 Relevant information from accredited institutions........................................................4 3. Analysis of the Petrochemicals industry and distribution....................................................5 4. Companys competitors.......................................................................................................5 5. Companys suppliers............................................................................................................6 6. Companys customers..........................................................................................................7 7. SWOT Analysis...................................................................................................................8 8. Risk Evaluation....................................................................................................................8 9. Companys market position.................................................................................................9 10. Financial Analysis of the company......................................................................................9 10.1 Analysis of the Balance Sheet..................................................................................9 10.2 Analysis of the profit & Loss Account..................................................................11 11. Ratio Analysis....................................................................................................................13 12. Companys future projects.................................................................................................16 Conclusions..............................................................................................................................18 Bibliography.............................................................................................................................19

1. Description of the company

S.C. Petrochemicals S.A declared that their main mission is to provide high quality services. An organization maintains its reason to exist only when its services meet the needs and expectations of its customers, the focus of S.C. Petrochemicals S.As policy in quality domain is on the client. Customer satisfaction can be ensured only when there is a harmonious interaction between the responsibility of management, human and material resources and quality management system structure. Therefore the overall activity of our organization is based on the following principles: customer orientation (customer satisfaction) leadership (performance management and participatory) management decision based on facts Mutually beneficial supplier relationships addressing systemic processes within the company staff motivation and satisfaction continuous improvement of performance To achieve these goals the company has proposed implementing and maintaining a quality management system in accordance with reference standard ISO 9001: 2008, designed to continuously improve its performance by taking into account the needs and expectations of all stakeholders (customers, suppliers, employees, society). The policy adopted the following: providing quality services, following European legislation and national requirements, to come to be recognized as a leading organization in our industry; continuous improvement of services offered by Treiro by identifying and correcting any discrepancies found; continuous training of all employees to achieve awareness and taking responsibility for quality performance; fostering among its staff, skills, responsibility and a positive attitude; ensure consistency in communication with customers to better understand and manage risk; maintaining credible competitor status, serious, quality infrastructure in the reliability, competence of services offered; Attracting and maintaining innovative and creative staff; attracting new customers; operation of the market in terms of profitability; environmental protection. Employees at all levels are aware of the advantages they offer quality services and their impact on customer satisfaction, the other employees, the economic efficiency and on society at large. Each employee is trained, motivated and has provided conditions for the pursuit of health and safety conditions at work.

1.1 Structure
S.C. Petrochemicals S.A is a transport company specialized in distribution of petroleum products (fuel, oil and LPG) from refineries (deposits) at the point of sale (filling stations). Registered office is located in Magurele, 409 Hall Street Atomistilor No central 2nd floor room 24, Ilfov, and operational headquarters rented 260 m offices in Sauce Catelu Station No. 174, C7 body, Sector 3, Bucharest, Romania Associated persons: DI IN 3375 srl-shares (48.91%) - DRUSIAN srl-3375 shares (48.91%)-ROSSI-shares GABRIELE 150 (2.1739%). Authorized persons: Renato Angelo Drusian Sirtori.-administrator with full powers Employees: 143 contracts indefinitely.

1.2 History
S.C. Petrochemicals S.A was founded in late 1998, foreign capital, especially to their activity in the transport and distribution of petroleum products and recorded a rapid development. It began its work in spring 1999 with three vehicles with permanent contracts. Since 2001 the company and expanded the business to transport LPG in cylinders and in tanks, an activity which is carried by their vehicles purchased.

2. Banking relationships
Until now, S.C. Petrochemicals S.A. has developed a very good relationship with Intesa Sao Paolo. S.C. Petrochemicals S.A holds current accounts in RON, USD and Euro with the bank, and has offered this bank 99% of its account activity is currently held by Intesa Sao Paolo. As a consequence, the company enjoys a preferential treatment including overnight deposit option on the Euro and RON accounts, preferential interest rates on credit and fees. The following table depicts the accounts, their preferential conditions and the approximate balances options at Intesa Sao Paolo, Sucursala Izvor.
Table no.1

Account USD RON EURO

Preferential conditions

Balance at 31.12.2010 0 USD Overnight deposit interest -3% Approx. 900 000 Lei yearly interest Overnight deposit interest -2% Approx. 100 000 Euro yearly interest
Source : S.C. Petrochemicals S.A.s internal documents

Moreover, the bank the company also works with is BRD GSG. The firm has accounts in Euro and RON.

Table no. 2

Bank BRD GSG

Type of account Current account

Currency Euro, RON

Monthly cash flow (RON) 25 000

Source : S.C. Petrochemicals S.A.s internal documents

2.1 Credit history The company has contracted just one investment credit from Intesa SanPaolo. This loan (with an interest rate of 5.20%/ year) matured in June 2010, and the amount of 300 000 Euro was fully repaid over a period of 3 years, with no monthly delays. The object of the credit was the purchase of a building of 1200 sqm, in Magurele City. The company holds 30 financial leasing contracts for the company, whose financial statement can be depicted from the following table :
Table no.3
Leasing company Obiect Contract Total monthly paymen t (Euro) 20150 52153 850 Account balance (Euro) 236.462 894.347 18.933 Maturity date oct.2010, nov.2011, febr.2012 19ctr/2011 7ctr/2012 febr.2012

UNICREDIT VFS INT PORSCHE LEASING

car car car

3 contracts 26 contracts 1 contract

Source : S.C. Petrochemicals S.A.s internal documents

This amount represents the balance of the financial debts of the company. This figure will be further used for the calculation of the quantitative debt coverage factor within the credit scoring analysis. 2.2 Relevant information from accredited institutions A. Credit Information Bureau Database According to the Credit Information Bureau statement, S.C. Petrochemicals S.A. has no recordings of unpaid loans in the database. B. Payment Incident Bureau Database According to the Payment Incident Bureau statement, the company has a major recording on the 21st of June 2011 with the sum of 59 333.05 Lei, regarding a refused promissory note because of partial lack of money Speaking about this recording, the company declared that it represented the equivalent value of a leasing instalment ( Beneficiary : UniCredit Leasing). C. Taxes, social insurances to the state budget According to the consultation from the 5th of December 2011, the company has paid all its debts to the state budget.
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3. Analysis of the Petrochemicals industry and distribution

Petrol industry in Romania has its beginnings in the 19th century. The distribution and transport of petroleum products has been free from 1994. In the past, the government used to control the prices from the gas market through Petrom. Thus, In present times, after the selling of Petrom to OMV, the influence of the Government was reduced. The main gas products in Romania, mil.tones(Table no.4) 2000 2001 2002 2003 2004 10 532 10 948 11 906 10 736 12 358 Petroleum 3 221 3 394 4 404 3 841 4 276 Gasoline 3 354 3 842 4 305 3 721 3 928 Diesel oil 1 433 1 797 2 050 1 558 1 553 Fuel oil 267 311 291 322 340 GPL
Source : http://www.insse.ro/publicatii/Romania_in_cifre.pdf

Even though the crisis has brought decreases in all domains, every economy need the transportation of fuel in order for the entire economical life to survive.

4. Companys competitors
The company has a strong position on the market and as competitors, S.C. Petrochemicals S.A has the following firms : Petrom With activities in the business segments of Exploration and Production, Refining, Marketing, Gas and Power, Petrom has proved oil and gas reserves of 854 mn boe, a maximum refining capacity of 8 million metric tons per year, approximately 540 filling stations in Romania and 270 filling stations in Moldova, Bulgaria and Serbia. In 2009, the turnover of the company was EUR 3,029 mn and EBITDA was EUR 696 million. After its privatization in 2004, the company recorded positive results. The modernization process initiated in 2005 is underway in accordance. Rompetrol The Rompetrol Group N.V. is a multinational oil company headquartered in Amsterdam, The Netherlands, operating in 12 countries, and with the majority of its assets and operations based in France, Romania, Spain, and South-East Europe. The group is active primarily in refining, marketing and trading, with additional operations in exploration and production, and other oil industry services such as drilling, EPCM, and transportation. TRG aims to become one of the largest independent oil companies in Europe and obtain a strong position in the Black Sea and Mediterranean areas. Rompetrol is a well-established oil company, a trustworthy worldwide partner, and a revered corporate citizen. The success and strength of our business lies first and foremost with our staff. Therefore, if our actions are dynamic, modern, creative and experienced, it is due to the employees who sustain our business, and who can be best described by those four words. OMV With Group sales of EUR 34.05 bn and a workforce of 29,800 employees in 2011, OMV Aktiengesellschaft is one of Austrias largest listed industrial companies. In Exploration and
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Production, OMV is active in two core countries Romania and Austria and holds a balanced international portfolio. OMV had proven oil and gas reserves of approximately 1.13 bn boe as of year-end 2011 and a production of around 288,000 boe/d in 2011. In Refining and Marketing, OMV has an annual refining capacity of 22.3 mn t and as of the end of 2011 approximately 4,500 filling stations in 13 countries including Turkey. In Gas and Power, OMV sold approximately 24 bcm of gas in 2011. In Austria, OMV operates a 2,000 km long gas pipeline network with a marketed capacity of around 101 bcm in 2011. With a trading volume of around 40 bcm in 2011, OMVs gas trading platform, the Central European Gas Hub, is amongst the most important hubs in Continental Europe. OMV further strengthened its position through the ownership of a 97% stake in Petrol Ofisi, Turkeys leading company in the retail and commercial business.

5. Companys suppliers
S.C. Petrochemicals S.A. makes sure that the entire supply process of merchandise and service satisfies the own necessities and also the clients requests. All the suppliers are evaluated before the beginning of the collaboration with them. The situation of the rollover of the suppliers between January-October 2011 is presented below :
Table no.5
Suppliers OMV PETROM Lukoil Romania Cefin Romania Dumatrucks SA Others TOTAL Rollover 2011 3.985.955 Lei 2.370.393 Lei 1.140.299 Lei 422.671 Lei 1.578.993 Lei 9.498.311 Lei % rollover 2011 26% 25% 12% 4.5% 32.5 % 100% Product type fuel fuel Auto repairs /parts Auto repairs /parts Due date 20 days 23 days 45 days 45 days

Source : S.C. Petrochemicals S.A.s internal documents

The value of the debts owed to suppliers on the 31st of October was approx. 4.855.157 Lei, as the tabel shows :
Table no.6
Suppliers DI.PE SRL Italia DRUSIAN SRL Italia OMV Mineral Oel (OMV Petrom Marketing) Lukoil Downstream SRL Cefin Romania SRL Sold
1.044.637 890.278 554.805 554.805

< 30 days RON

30-90 days RON

over 90 days RON

% out of total
21.51% 18.33% 11.43%

472.533 401.713

472.533 303.365.41 98.347.70

9.73% 8.27%

Dralog Romania SRL Others TOTAL

315.864 1.175.327

315.864

6.51% 24.22%

4.855.157

100.00%

Source : S.C. Petrochemicals S.A.s internal documents

S.C. Petrochemicals S.A. has long term relationships to its suppliers and it is very important that it does not depend on one supplier. The company registers a quite high level of dependency on OMV Petrom and Lukoil Romania but it is not completely dependent on them.

6. Companys customers
A dispatch was set up within the structure of the company, with well trained and experienced staff in conducting the road tankers, to supply the stations and points ( commercial or domestic ) but also for the permanent monitoring of stocks and consumption ( sales ). The qualified staff is the company guarantee of quality services. The 100 professional drivers in Petrochemicals conduct regular preventive, defensive driving courses , road traffic legislation , ADR regulations , first aid and fire prevention training. The situation of the rollover of clients between January-October 2011 is presented bellow:
Table no.7
Client Butan Gas Romania SA OMV Petrom Marketing Primagas/Crimbo Gas
Petrom LPG

Rollover 2011 7.500.196 Lei 7.244.822 Lei 1.724.560 Lei 1.193.801 Lei 1.314.309 Lei 18.977.688 Lei

% Rollover 2011 39% 38% 10% 7% 6% 100%

Product type services transport services transport services transport services transport Services transport

Due date 45 days 20 days 30 days 30 days

Others TOTAL

Source : S.C. Petrochemicals S.A.s internal documents

On the 31st of October 2011, the sold of the clients account recorded approx. 4.311.893 Lei, as the tabel shows :
Table no.8 Name of the client
Butan Gas Romania SA OMV Mineral Oel (OMV Petrom Marketing)

Sold of the balance

3.179.111 466.218

< 30 days RON

466.218

30-90 days RON

2.226.387

over 90 days RON

952.724

% out of total
74% 11%

Primagaz Romania SRL Petrom LPG SA Crimbo Gas 2003 SRL Others TOTAL

255.923 203.738 142.258 64.645

255.923 203.738 142.258 64.645

6% 5% 3% 1%

4.311.893

1.132.782

2.226.387

952.724

100%

Source : S.C. Petrochemicals S.A.s internal documents

7. SWOT Analysis
Another way to assess a company is the SWOT analysis, which implies the identification of strengths, weaknesses, opportunities and threats. Strengths and weaknesses refer to internal environment of the company, while opportunities and threats to the external environment. A. Strengths Very good market position Cost advantages Name recognition Skilled employees Loyal customers and good reputation among customers Experience of the managers in the industry; S.C. Petrochemicals S.A. has as managers people who own firms in this field for many years but in other countries Long term relationship with suppliers Ascending business trend B. Weaknesses Medium advertising offers Dependence on the weather; it may cause delays in transport because of weather conditions C. Opportunities Growing customer base Could seek better supply deals Construction of highways

D. Threats Legislation could change because of the environmental effect caused by cars Price competition

8. Risk evaluation
Table no.9

Key risks Business risk

Mitigation factors
The management, meaning the shareholders, has experience in this field they own companies with the same object of activity for over 30 years in Italy. During financial crisis, the transporters turnovers
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Market risk

Repayment risk Foreign exchange risk

decreased. But taking into account the demand of car fuel is unchanged or increased, there is no market risk. The company works with economically powerful clients(over 80% from the turnover), there is no problem regarding repayment. The company collects only in Lei, so there is n foreign exchange risk. Source : S.C. Petrochemicals S.A. internal documents

9. Companys market position

The company has won many prizes in the field that it activates, meaning on land transport and through pipes : - 2008 Top of Companies 2008 3rd place, award granted by the Ilfov Chamber of Commerce and Industry - 2010 1st place in Top Business Romania 2010, award granted by the LIST OF COMPANIES - 2011 1st place in Top Profit Romania 2011, award granted by the LIST OF COMPANIES - 2011 3rd place in Top Business Romania 2011, award granted by the LIST OF COMPANIES

10.

Financial analysis of the company

The financial analysis of the activity of S.C. Petrochemicals S.A. was realized based on the evolution of the accounting documents from 2009 through 2011 and forecasting techniques.

10.1 Analysis of the balance sheet

Table no.10
Assets Current assets
Cash&bank acc. Receivables - trade Other receivables Inventories Total current assets * 31.dec.09 477.123 2.392.003 494.001 87.311 3.450.438 31.dec.09 11.633.79 3 0 0 11.582.85 0 0 31.dec.10 443.722 3.813.108 70.964 166.633 4.494.428 31.dec.10 9.802.556 0 0 9.748.335 10.839 31.dec.11 478.104 4.970.940 87.082 165.751 5.701.877 31.dec.11 6.581.716 0 0 6.546.049 0

Liabilities Current liabilities

Account payables Short term bank loans Other short term debts * to the state budget * to the associates Total current liabilities 31.dec.09 4.478.690 0 592.193 305.269 0 5.070.883 31.dec.09 465.102 0 7.840.950 0 0 31.dec.10 5.825.706 374.920 381.726 238.253 0 6.582.352 31.dec.10 0 0 5.832.887 0 0 31.dec.11 6.159.405 394.300 629.527 447.835 0 7.183.232 31.dec.11 0 0 3.090.742 0 0

Non - current assets

Tangible assets * land * buildings * equipment * in progress

Non - current liabilities

Long term bank debts * overdue Other long term debts * to the state budget * to the associates

Financial assets Intangible assets Total fixed assets

1.368 10.067 11.645.22 8

1.368 2.337 9.806.261

98.591 696 6.681.004

Capital, reserves & funds Result - previous years Result - current year Profit allocation Total equity Provisions for risks

1.378.227 302.861 80.218 -7.048 1.754.258 167.999 0 10.228.309 15.299.192

1.411.472 376.030 550.603 -33.245 2.304.860 0 0 8.137.747 14.720.09 9

1.428.336 893.388 264.711 -16.847 2.569.588 167.999 0 5.828.329 13.011.56 1

Adjustment accounts Total non - current assets Total assets

203.526 11.848.75 4 15.299.19 2

419.410 10.225.67 1 14.720.09 9

628.680 7.309.684 13.011.56 1

Adjustment accounts Total non - current liabilities Total liabilities

Source : S.C. Petrochemicals S.A.s internal documents

Share of Cash = Share of =

= 0,02922 = 0,03014 = 0,03674

Share of

Share of

Share of Short-Term Liabilities = Share of =

= 0,33144 = 0,44716 = 0,0552

Share of Share of

= =

Share of Long -Term Liabilities = Share of =

= 0,66855 = 0,55283

Share of

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Share of

= 0,04479

NWC = Current assets Current Liabilities = 3.450.438 - 5.070.883 = 4.494.428 - 6.582.352 = 5.701.877 - 7.183.232

Net working capital is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted Cash Flow). If current assets are less than current liabilities it means that the company has a working capital deficiency, also called a working capital deficit. This means that the company is not able to continue its operations and hasnt sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The decrease in working capital indicates that the business has increased current liabilities ( short-term bank loans, accounts payables as we can observe from the table above). Inventories increased from one year to another which allows the company an uninterrupted production flow higher by each year it comes but also the investment in raw materials is to be reduced and minimizes reordering costs - and hence increases cash flow. Besides this, the lead times in production should be lowered to reduce Work in Progress (WIP) and similarly, the Finished Goods should be kept on as low level as possible to avoid over production

10.2 Analysis of the profit and loss account

Table no.11

RON Income 31.dec. 09 21.645 .013 21.645 .013 22.498 .921 1.916. 602 626 218 31.dec. 10 21.758 .533 21.758 .533 22.037 .788 1.372. 389 132.37 8 485 31.dec. 11 22.528 .676 22.528 .676 23.064 .852 904.46 1 151.96 8 1.248 Expenses 31.dec. 31.dec. 09 10 0 0 20.582 .319 0 585.93 1 914.14 20.665 .399 0 171.25 6 570.53 31.dec. 11 0 22.160 .391 0 171.86 9 523.01

Turnover Margin of sales Total operating income Operating Profit Exchange rate income Interest

Cost of sales Loss from sales Total operating expenses Operating Loss Exchange rate expenses Interest
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income Total financial income Profit before extraordinary items Extraordinar y income Profit before tax Total income

106.19 6 140.96 8 0 140.96 8 22.605 .117

603.79 6 694.31 2 0 694.31 2 22.641 .584

expenses 473.86 Total financial 4 expenses 336.95 Loss before 1 extraordinary items 0 Extraordinary expenses 336.95 Loss before 1 tax 23.538 Total expenses .716 Profit tax

4 1.881. 830 0

0 1.281. 873 0

7 1.041. 374 0

0 0 22.464 .149 60.750

0 0 21.947 .272 143.70 9 0

0 0 23.201 .765 72.240

Net profit EBIT

80.218 1.055. 112

550.60 3 1.264. 842

264.71 Loss 0 0 1 859.96 8 Source : S.C. Petrochemicals S.A.s internal documents

Analyzing the profit and loss account of S.C. Petrochemicals S.A, we can come up with the following highlights : The turnover for 2011 is almost equal with the one from 2010 (increased with ~1%), maintain its upward trend compared to 2009 The operating profit from 2011 registered a decrease, maintaining the negative trend started in 2009 (61% decrease from 2009 to 2011), mainly from the increasing of fuel and spare parts expenses The Net Profit also decreased, from 80 218 RON in 2009 to 264 711 RON in 2011, keeping the negative trend all three years Furthermore, EBIT registered the same trend like the other indicators
Cash Flow = Net Income + Depreciation & Amortization Calculated revenues Net Working Capital = 80 218 + 0 0 + 1 620 445 = 1 700 663 RON = 550 603 + 0 0 + 2 087 924 = 2 638 527 RON = 264 711 + 0 0 + 1 481 355 = 1 746 066 RON

The company has the capacity to generate positive cash flow, source of repayment is backed by oil transport business activity for multinational companies: Butan Gas, Lukoil, OMV.

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11. Ratios analysis

Table no.12
31-Dec09 Liquidity Ratios (Short term solvency) 31-Dec10 31-Dec11 Indust ry Avera ge 0.00% 0.00%

1. Current ratio 2. Quick ratio 3. Fixed ratio

Current assets/Current liabilities Quick Assets/Current liabilities (Fixed Assets+Investment Assests)/Equity

0.68 0.66 6.64

0.68 0.66 4.25

0.79 0.77 2.60

Debt Managem ent Ratios

1. Leverage ratio 2. Debts to assets 3. Times Interest Earned

Total debts/Equity Total debts/Assets EBIT/Interest expense

7.63 0.87 1.15

5.39 0.84 2.22

4.00 0.79 1.64

0.00% 0.00% 0.00

Assets Managem ent Ratios

1. Total assets turnover 2. Inventory turnover 3. Receviables Turnover 4. Payables Turnover

Turnover/Assets Trunover/Invenory Turnover/Receivables Turnover/Payables

1.41 247.91 9.05 4.83

1.48 130.58 5.71 3.73

1.73 135.92 4.53 3.66

0.00 0.00 -

Growth Ratios

1. Sales (%) 2. Margin of sales (%) 3. Liquid Assets (%)

(Sales1-Sales0)/Sales0 (Margin of sales1/Margin of sales0) (Liquid Assets1-Liquid Assests0)/Liquid Assets0

1.01 1.03 30.26%

1.04 0.34 26.87%

Profitabil ity Ratios

1. Profit margin on sales 2. Return on assets ROA 3. Return on equity - ROE

Net profit/Turnover Net profit/Assets Net profit/Equity

0.37% 0.52% 4.57%

2.53% 3.74% 23.89%

1.17% 2.03% 10.30%

0.00% 0.00% -

Source : S.C. Petrochemicals S.A.s internal documents

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Current ratio is a financial ratio that measures whether or not a company has enough resources to pay its debt over the next business cycle (usually 12 months) by comparing firm's current assets to its current liabilities. The higher the current ratio is, the more capable the company is to pay its obligations. Current ratio is also affected by seasonality. If current ratio is bellow 1 (current liabilities exceed current assets), then the company may have problems paying its bills on time. Acceptable current ratio values vary from industry to industry. In this case, however, the low value do not indicate a critical problem but should concern the management. For the quick ratio, just like the current ratio, a higher value indicates greater liquidity. Having a quick ratio of 1:1 or higher does not mean that the company has a strong liquidity position because a company may have high quick ratio but slow paying debtors. On the other hand, SC Petrochemicals having a bit lower quick ratio may have fast moving inventories. For example, if inventory turns over much more rapidly than the accounts payable become due, then the current ratio will be less than one. This can allow to SC Petrochemicals to operate with a low current ratio. Moving on to the Leverage Ratios, in this case, the leverage ratio in 2011 (4.00) had decreased from 7.63 in 2009, which is an improvement since generally, companies with higher leverage as determined by a leverage ratio are thought to be more risky because they have more liabilities and less equity. Regarding the Debt to Assets Ratio, it quantifies how leveraged a company is, and a company's degree of leverage is often a measure of risk. When the debt ratio is high, the company has a lot of debt relative to its assets. It is thus carrying a bigger burden in the sense that principal and interest payments take a significant amount of the company's cash flows, and a hiccup in financial performance or a rise in interest rates could result in default. If the ratio is greater than 0.5, most of the company's assets are financed through debt. If the ratio is less than 0.5, most of the company's assets are financed through equity. In this case, even if the value is higher, it can bring several advantages : The deductibility of interest from business expenses can provide tax advantages, returns on equity can be higher and debt can provide a suitable source of capital to start or expand a business. The times interest earned ratio is another debt ratio that measures the long-term solvency of a business. It measures how well a company can meet its interest expense obligations. Higher value of times interest earned ratio is favourable meaning greater ability of a business to repay its interst and debt. For SC Petrochemicals, TIE has a value 1.64 being safe to meet its interest obligations because earnings are significantly greater than annual interest obligations. There is no set number that represents a good total asset turnover value because every industry has varying business models. What it is worth mentioning is the fact that the increases in the asset turnover ratio over time indicate the company SC Petrochemicals has enlarged its capacity and is becoming more efficient in generating revenues/ Inventory turnover reflects how frequently a company flushes inventory from its system within a given financial reporting period. The high inventory turnover ratio that the company has implies strong sales , can indicate better liquidity and a lower risk of loss through un-saleable stock. Accounts receivable turnover is the ratio of net credit sales to average accounts receivable. It is an activity or efficiency ratio and it measures average number of times a business collects its receivables during a period usually a year. Generally a high value of accounts receivable turnover is favorable and lower figure may indicate inefficiency in collecting
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outstanding sales. But a normal level of receivables turnover is different for different industries. Increase in accounts receivable turnover overtime indicates improvement in the process of cash collection on credit sales. The value of the ratio has been in continuous decline in the last years. Its value in 2011 was 4.53, which is a fairly good value compared with the industry average. However, management should pay attention next year, because a low indicator might suggest that the company does not collect its receivables in time or that it might have quality problems regarding the services they offer. Accounts payable turnover is the ratio of net credit purchases of a business to its average accounts payable during the period. It measures short term liquidity of business since it shows how many times during a period, an amount equal to average accounts payable is paid to suppliers by a business. A higher value indicates that the business was able to repay its suppliers quickly. Thus higher value of accounts payable turnover is favorable. This ratio can be of great importance to suppliers since they are interested in getting paid early for their supplies. Other things equal, a supplier should prefer to sell to a company with higher accounts payable turnover ratio. The value of this ratio (3.66) is lower than the industry average and it also decreased in the last few years like the accounts receivables turnover, but at a steadier pace. This is also a concerning fact, the company might not be able to pay the suppliers in time or encounter quality problems in the near future. Even though the two ratios analyzed before indicate some problems the company might have, it is important to mention that both sales percentage variation and liquid assets percentage variation has a positive value. In other words, the company increased its sales in 2011 than in 2010 and the value of its liquid assets increased as well, which translates into a lower risk of illiquidity or problems with sales. Net profit margin is the ratio of net profit of a business to its revenue. It is a profitability ratio measuring what proportion of revenue is converted into net profit (i.e. revenue less cost of goods sold). Higher values indicate that more cents are earned per dollar of revenue which is favorable because more profit will be available to cover non-production costs. But net margin ratio analysis may mean different things for different kinds of businesses. For example, in case of a large manufacturer, net margin measures the efficiency of production process. For small retailers it gives an impression of pricing strategy of the business. Even though the net profit also decreased in 2011 compared with 2010, the ratio is higher than the industry average. It is clear that the company had some losses last year, but it is important to keep an eye on the net profit next year. Return on assets is the ratio of annual net income to average total assets of a business during a financial year. It measures efficiency of the business in using its assets to generate net income. It is a profitability ratio. Return on assets indicates the number of cents earned on each dollar of assets. Thus higher values of return on assets show that business is more profitable. This ratio should be only used to compare companies in the same industry. The reason for this is that companies in some industries are most asset-insensitive i.e. they need expensive plant and equipment to generate income compared to others. Their ROA will naturally be lower than the ROA of companies which are low asset-insensitive. An increasing trend of ROA indicates that the profitability of the company is improving. Conversely, a decreasing trend means that profitability is deteriorating. Because the net profit decreased in the last year and assets increased but at a lower rate, this indicator has also decreased and it is also slightly below industry average. Return on equity or return on capital is the ratio of net income of a business during a year to its stockholders' equity during that year. It is a measure of profitability of stockholders'
15

investments. It shows net income as percentage of shareholder equity. Higher values are generally favorable meaning that the company is efficient in generating income on new investment. Investors should compare the ROE of different companies and also check the trend in ROE over time. However, relying solely on ROE for investment decisions is not safe. It can be artificially influenced by the management, for example, when debt financing is used to reduce share capital there will be an increase in ROE even if income remains constant. ROE is higher than the industry average but also lower than last year. The management team should however be careful in making investments based solely on ROE, because it takes into account only the return, but not the risk.

12. Companys future projects

At present, the firm has very good technological equipment that allows the company to perform at a high level its services. All means of transport have, beside GPS tracking, the legal authorizations issued by Romanian Road Register, Romanian Road Authority, Iprochim, CNCIR (Romanian Company for the Control of Boilers, Lifting Devices and Pressurized Containers ), BRML ( Romanian Office of Legal Metrology ). All the tankers that are used for transport of oil products have compartments and are equipped with flow meters with electronic temperature compensation, possibly with the pump required for above-ground unloading or at very long distances (40-50 m), fitted according to the clients demands. The park of vehicles of Petrichemicals is made up of 100 motor vehicles brands such as Renault , Volvo , Iveco , Scania , Man: tractor trucks , road tankers for oil products , Liquefied Petroleum Gas transport road tankers , vehicles specialized in the transport of LPG cylinders. The acquisition of higher and bigger quality machines is extremely important for the satisfaction of the clients needs. So, the company plans to invest in 30 vehicles, which would require an initial investment of 1 000 000 RON and the generated sales would be 10 000 000 RON in the first year. After that, the sales will grow with 1% per year for the following 4 years. Variable costs are 2 200 000 RON in the first year and fixed costs are considered to be 200 000 RON (including depreciation, calculated with straight line method). The income tax rate is 16% and the assumed increase of the investment in Net Working Capital is 700 RON in the first year. Moreover, the investors require a return on 20% and the residual value is 4 000 000 RON. In order for the company to establish the profitability of the investment, net present value (NPV) is one method for this estimation. NPV measures the total amount by which an investment is expected to increase based on the present value of its potential cash flows and initial cost. NPV compares the value of a dollar today to the value of that same dollar in the future, taking returns into account.
NPV = n = life span of the project

- cash flow of year i i number of the year K return of investment

Therefore, the cash flow generated in each year is required. Cash Flow = Net Income + Depreciation & Amortization Calculated revenues Net Working Capital

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The monthly net income is depicted in the income statement sheet each for each year. NI = (Sales Variable Costs Fixed Costs Depreciation & Amortization) * (1-Income Tax) Since Sales differ from year to year, they will have to be calculated.
= = = = = + 1%*

Also Variables Costs are different each year.

= x* => x=0.22 = 2 420 000 RON = 2640000 RON = 2860000 RON = 3080000 RON

After that, Net Income can be computed.

= 638400 RON = 703900 RON = 7694400 RON = 8349600 RON = 9004800 RON

In order for the cash flows to be computed, depreciation of the cars has to be calculated.
Depreciation = = 2638330 RON = 9039200 RON = 9694400 RON = 10349600 RON = 11004800 RON

= 2 000 000 RON

Hence, all the values are known and NPV can be calculated.
NPV = + + + + + - 1000 000 RON

NPV = 24 162 238.95 RON

The value is higher than 0, so the company should accept the project and increase the value of the firm.

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Conclusions
The society has made efforts to maintain the economic activity at the same level in the current financial conditions. It had even tried to develop new collaborative relationships, even though the operational expenses had been reduced so that the company could have profit. The clients the company has is a proof of a good reputation and also, the company does not have a bad history regarding bad debts.

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Bibliography
1. Grath, A. (2008) The Handbook of International Trade and Finance: The Complete Guide to Risk Management, International Payments and Currency Management, Bonds and Guarantees, Credit Insurance and Trade Finance, Philadelphia: Kogan Page. 2. S.C. Petrochemicals S.R.L.s internal documents 3. Olteanu, A. (2003). Management bancar, Ed. Dareco, Bucuresti, 2003 4. Van Greuning, H., Brajovic Bratanovic, S. (2009) Analyzing banking risk a framework for assessing corporate governance and risk management, 3rd edition, Washington D.C.: The World Bank 5. www.finaritare.ro/ 6. www.insse.ro/publicatii/Romania_in_cifre.pdf 7. www.investopedia.com 8. www.omv.ro 9. www.Petrochemicals.ro/ 10. www.romaniapress.com/ 11. www.rompetrol.ro 12. www.treiro.ro/ 13. www.wisegeek.com

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