An Analyze of the Factors that Influence the Net Assets Growth in Pharmaceutical Companies of Romania
Author:
Univ. Prof. Ion STANCU, Ph. D.; Assistant Andrei TINCA, Ph. D.
JEL:
G12, L25, M41
DOI:
Keywords:
net asset, revenues, expenses, assets, debts
Abstract:
A company’s main objective is to maximize shareholders` wealth, with equity development being an essential element considered by analysts. Accordingly, it is intended that the equity growth and the factors which influence it are very key to the maximization of shareholder value. Company’s revenue and expenses reflect acts of the enrichment or the consumer equity. Real increase of the net profit determines net asset increases and therefore increases the shareholders` wealth. Conversely, losses lead to lower net assets and cause the de-capitalization of shareholders` wealth until its depletion and further to debts impairment. Net assets may indicate an enrichment (increase in equity), in case of net profit reinvestment or, conversely, an impoverishment (a reduction of equity) when closing the year with losses.\r\nIn this article, the authors` intention is to test the relationship between the net asset value (ANC), on the one hand, and ten relevant factors on revenue, expenses, assets and debts of three pharmaceutical companies listed on the Bucharest Stock Exchange, on the other hand, using quarterly data from their financial statements. After validation of regression models, our econometric analysis revealed as statistically significant only quarterly changes in: net profit (DPN), fixed assets (DAF), receivables (DCL) and the net asset of the previous quarter (DACR(-1)) .\r\nThe coefficient of determination, adjusted R2, has values between 41 % and 99 %. The Durbin-Watson statistic of the validated models has almost ideal value 2, with the exception of the company "B" (2.51) and of the entire portfolio (2.34). Sensitivity coefficients of the factors identified are validated at a 5% significance level and, overall, the models are valid at 1% significance.\r\nThe authors conclude, therefore, that the net assets of pharmaceutical companies analyzed are significantly explained by the changes in net income, in fixed asset balances and the balances of receivables. In other words, shareholders` wealth is dependent on the profitability of the business of these companies, investments in fixed assets and equipment development, and in receivables balances.\r\n\r\n