Organised Crime Affecting The United Kingdom Essay

Organised Crime Affecting The United Kingdom Essay In order to assess the extent to which organised crime is affecting the UK one must first try to define the term itself. A recent definition by Interpol describes it as Any group having a corporate structure whose primary objective is to obtain money through illegal activities, often surviving on fear and corruption  [1]  . UK based SOCA simply states that Organised crime covers a very wide range of activity and individuals involved in a number of crime sectors. The most damaging sectors to the UK are judged to be trafficking of Class A drugs, organised immigration crime and fraud. In addition, there is a wide range of other threats, including high-tech crime, counterfeiting, the use of firearms by serious criminals, serious robbery, organised vehicle crime, cultural property crime and others.  [2]  There are many terms brandished about for organised crime and it is difficult to come up with one definition, therefore, this makes it difficult to also assess what is being tackl ed as far as the UK in concerned. As the SOCA definition above shows there are many different types of crimes which can be called organised crime so therefore in order to assess of how there being tackled one will need to assess them individually, for the purposes of this essay one will focus on Trafficking i.e. drugs and how money laundering is being dealt with in the UK as a big part of organised crime are its proceeds. Organised crime generates a huge income and as crime becomes more globalised and so revenue generated from it increases more and more every day. Profits are usually in the form of cash so therefore need to be disguised in a way to blend into the banking system. The ultimate aim of the money laundering is to get the proceeds of the crime into the financial world legitimately, so the criminals can benefit from it and not get caught. The process is long and complicated as the cash has to moved several times in order to cover its tracks. Different routes the money might take are being transferred in between various different accounts and through front companies which are set up to disguise the illegitimate profits in a legal business form, this process is repeated many times until the criminals can extract their profits legitimately. There are three stages to money laundering, firstly placement, whereby the illegitimate profit is put into the banking system, followed by layering, where t he cash is passed through many different areas in order to perplex its origins, and the final step is integration, where the cash is put through legitimate companies and accounts. Money laundering in the UK is a criminal offence, and as such, any person involved in any known or suspected money laundering activity risks a criminal conviction carrying a jail term of up to 14 years. It is significant that even innocent involvement on the part of professionals such as bankers and lawyers can provoke a criminal charge. Money laundering is an offence covered by many different parts of legislation United Kingdom and can be found in statutes such as the Criminal Justice Act 1988 (as amended), and the Terrorism Act 2000 (as amended). The most significant change made by these two pieces of legislation is that they enforce two new obligations to create Suspicious Transaction Reports. The legislation, then, increases the responsibility on professionals dealing with big financial business of any kind to be cautious in detecting suspicious transactions, and this in effect helps find criminals when such occasions do arise, so, in essence, this is an example of the UK successfully implementing legislation in order to tackle organised crime . This attack on money laundering is huge part of tackling organised crime as it is suggested that the economic and social impact of organised crime in the UK is staggering and statistics show that global profits from people smuggling are estimated to be $10 billion annuall y, 280,000 problem drug users cause half of all crime, every  £1 spent on heroin is estimated to generate about  £4 of damage to the national economy and there are around 400 organised crime bosses in the UK with an amassed criminal wealth of approximately  £440 million.  [3]  The economic and social cost of organised crime is estimated to be in the region of  £20 to  £40 billion per year. The role of recovering criminal assets fell upon the Assets Recovery Agency which was set up under the Proceeds of Crime act 2002 and played an important part in the governments plans to seize the profit out of crime, and separate and prevent the criminal organizations from continuing with their activities by removing the money which motivates their activities and their major source of income  [4]   The Assets Recovery Agency had three strategic aims to disrupt organised criminal enterprises through the recovery of criminal assets, thereby alleviating the effect of crime on communities, to promote the use of financial investigation as an integral part of criminal investigation, within and outside the Agency, domestically and internationally, through training and continuing professional development and to operate the agency in accordance with its vision and values.  [5]   The UK is a founding member of the Financial Action Task Force (FATF), established in 1989 to develop global measures to prevent money laundering. The FATF has 40 recommendations, engineered to combat money laundering and create the best resources to do so internationally. UK money laundering experts regularly participate in FATF mutual evaluations of its members, showing that the UKs initiatives against money laundering are strong as not only are they tackling the issue internally but are looking at the international impact money laundering has. On the 1st April 2008 the Assets Recovery Agency merged with the Serious Organised Crime Agency. Commenting on the merger Hughes, of SOCA said we are gaining important skills and expertise with the arrival of Assets Recovery Agency staff and we welcome them into SOCA. Now that the merger has taken place we will get on with the job that parliament want us to do, namely depriving crooks of their ill-gotten gains  [6]. In support of this the Home Office minister Coaker said that assets recovery is critical in the fight against all levels of crime and we are determined to stop criminals profiting from crimes which affect the lives of law-abiding majority.  [7]  Adding to this Goggins, said this merger will strengthen the fight against crime in Northern Ireland as it combines the intelligence expertise of SOCA with the hands-on practical experience of ARA. This combination will make the recovery of assets even more effective and strengthen our fight against those who profit from org anised crime.  [8]  This important merger highlights the steps in the UK have taken to try to successfully tackle aspects of organised crime, by merging together these two organisations it showed that the UK has acknowledged the fact the money laundering linked with organised crime is a very serious issue that needs to be dealt with. A further offence as introduced in the Drug Trafficking Act 1994 and the Terrorism Act 2000 which states the offence of failure to report. This occurs where the person suspects that another person is involved in laundering the proceeds of drug trafficking or terrorism, and fails to report it. In the case of the Terrorism Act 2000, this offence is broadened to those who have reasonable grounds for knowing or suspecting. These statutory offences have amplified the range of money laundering offences within the UK legislation, and have similarly enlarged the mandatory degree of vigilance on financial professionals. By increasing the legislation to include those or may not even be involved directly in the crime or its proceeds it eliminates any sort chains there may in a particular organised crime groups structure. This offence highlighted is very similar to offences laid out in the USs Racketeer Influenced and Corrupt Organizations (RICO) whereby prosecutors could arrest group leaders ba sed on the activities of those who worked with them. This shows another way in which the Uk is successfully trying to tackle the issue by looking at all aspects of weakening organised crime. Overall the legislation on tackling money laundering is effective, with agencies such as SOCA recognising its importance Money is at the heart of all organised crime. The lifestyle and status it brings are the main motivation for most criminals.  [9]. SOCA states that it is determined to ensure that criminals cant enjoy their profits  [10]. According to the report released by SOCA 2009/10  £317.5 million was seized from organised crimes groups in the UK. A recent example of SOCA in action in April 2011 where SOCA was granted the Confiscation Order in Leeds Crown Court for  £933,422 against Paul Anthony Romano Morgan from Leeds  [11], this is a significant achievement for the UK in tackling the issue of organised crime. In order for the UK to continue being protected the effects of money laundering, authorities, however, must work stronger at identifying criminals that are still accessing the financial system. Only by using more advanced method will criminals and money launderers become more hesitant. Professor Bill Gilmore stated: for the first time, to take co-ordinated and effective worldwide action to undermine the financial power of drug trafficking networks and other criminal organisations, is now in sight if not, as yet, fully within our reach.  [12]  Highlighting there is still room for the UK to improve to completely eradicate organised crime. One of the most threatening of activities undertaken by organised crimes groups is the trafficking of illegal narcotics. The drug trade has the capability to infiltrate all aspects of society and can threaten the social, political and economic security of any nation, so it is not surprising that it is becoming an increasing issue in the UK. The impact of the drug trade may not necessarily be the most threatening to social security, but it is probably the most threatening to the people of the country. The problems with drug trafficking are not simply mattered of criminal activities taking place but what the drugs trafficked into the country are causing, such as addiction and furthermore diseases being spread through improper use and then furthermore the crime associated with drug abuse as more and more people depends on these trafficked narcotics. McFarlane points to another interesting threat which may emerge from an increase in crime: Furthermore, with increasing crime, a free press and civil rights tend to be ignored both by the criminals and by the hard-pressed law enforcement agencies.  [13]  The threat that drug trafficking brings is potentially very large and is affecting the economic stability of the UK and therefore has become a focus of major law enforcement to tackle and one will now review on whether atte mpts to combat drug trafficking have been successful. The Serious Organised Crime Organisation (SOCA), takes a role in the gathering of information about major drug syndicates that control the UK drug trafficking scene. Created in 2007, SOCA is responsible for the collection, analysis, research and dissemination of intelligence relating to major criminals involved in serious crime, including the distribution and trafficking of drugs.  [14]  And in the Annual SOCA Plan 2010/2011 they mention that Class A drugs, poses the greatest single threat  [15]  showing that they realise that it is a serious target to be dealt with. SOCA has been working heavily on tackling drug trafficking with a recent case in again in April 2011 highlighting the capture and trial of one of SOCAs most-wanted, Edward Morton, who went on the run for more than three years,and has been sentenced to 24 years in prison for his part in a organised crime group which trafficked illegal narcotics worth millions of pounds into the UK. SOCAs Gerry Smyth said: This ope ration succeeded in breaking up highly organised professional drugs trafficking gang who brought large quantities of controlled drugs onto the streets of the North East of England. Morton tried to evade justice by hiding in Amsterdam. He failed. SOCA and its national and international partners are determined to bring fugitives back to the UK courts to face justice.  [16]  , this highlights SOCA and UKs enthusiasm on working with international organisation to tackle the problem, which is a positive factor as most drugs are trafficked into the country so therefore it is not enough to tackle the issue internally and from this case we can see the UK has picked up on this and is using this to tackle organised crime successfully. Important organisations that help deal with the international aspect of the problem is HM Customs and Excise National Investigation Service. There are two principal aspects of Customs control for drugs. The first is preventive control at ports and airports and through coastal surveillance. The second is specialist investigations based on information and intelligence gathered from various sources at home and overseas, designed to anticipate and intercept consignments of drugs and arrest the organisers of smuggling attempts.  [17]  With this work continuing it will add the to work with other agencies such as SOCA to deter drug traffickers in the UK. However one may note that the HM customs side of operations does need substantial improvement if today the figure of the profits of drugs being trafficked into the country remains at a staggering 4-6.6 billion a year, this emphasises aspects of the UK operations that needs to be improved in order to tackle organised crime successfully. In fulfilling its aims, the UK works as a partner or member in a number of leading international organisations, The UK is part of United Nations International Drug Control Programme (UNDCP), formed in 1991, which acts as the focal point in the United Nations for international support and battle against drugs. The UK is also an active member of the Dublin Group, which merges the EU and other countries to bring together individual country policies and give assistance to source country of the illegal narcotics. Many actions have been implemented throughout local Dublin Groups to ensure more commitment from national governments in assisting producer countries but also assistance from the actual source countries themselves in order to successfully tackle organised crime. In particular, the UK plays an important role in the 1988 UN Drugs Convention, which provides a broad framework for intercontinental cooperation against drug trafficking. The UK ratified the Convention in June 1991, extending it to UK Dependent Territories. The UK participates in the G8 Group on Transnational Organised Crime (TOC) following the G7/8 Halifax Summit in 1995. The groups objective was to recognise gaps in intercontinental cooperation against TOC and put forward realistic actions for improvement. All of these movements and actions were taken by the UK show their intent on successfully tackling drug trafficking and in essence organised crime as they have again acknowledged that the problem is not entirely internal and international aid needed to be addressed as most organised crime groups have a non-British ethnicity and in order to administer actions against them and to deter them in it important that the UK seek support of source countries and on reflection it seems that they have done this successfully. There are other arguments that state that the UK cannot tackle the issue of drug trafficking alone simply but regret the source or even the supply, some may argue that present legislation needs to be revisited and weaknesses in it need to be addressed, Steve Rolles of Transform Drug Policy said When prohibition of something collides with huge demand for it, you just create an economic opportunity and illegal criminal entrepreneurs will inevitably exploit the opportunity that it creates  [18]  Lord Mancroft agreed by stating We have controlled drugs in this country but you only have to walk a mile of this palace to realise that the controls do not work, because anywhere on the streets of London you can buy any of these drugs The way forward is a range somewhere from the way we control alcohol or indeed the most dangerous object in our everyday lives, the motorcar. If you go outside in the street and step in front of a moving motor car you will find out how dangerous it is, so what do we do? We do not prohibit it. We license the vehicle, we license the users, we made them pass a test, we make them have insurance so if they damage anybody they have to pay up, we tell them how fast they can use it, on which side of the road. That is control.  [19]   However to argue in favour of what is already being done and its benefits and arguing against controlling drugs trade Professor Strang of the National Addiction Centre told states, There is no question that the illegality of a substance is a major deterrent to its useà ¢Ã¢â€š ¬Ã‚ ¦one would have to presume that if legal constraints were taken away the level of use would almost certainly increase  [20]  , these two arguments highlight different approaches the UK can implement the second being what is being actioned now, however despite how drastic the first argument that Rolles and Mancroft mat be one may have to consider its possible effectiveness in aiding the UKs campaign in tackling organised crime, by eliminating the opportunity for organised crime groups. To conclude is seems on a whole the UK is successfully trying to tackle organised crime, but there are some hole so to speak and from looking at SOCA Annual report 2010/11 one can see that the UKs weakness when it comes to tackling organised crime is its understanding of the inner workings of an organised crime group, Organised crime is identified in the National Security Strategy as a major threat to the UK. Broad estimates value the economic and social costs to the UK, including the costs of combating it, at between  £20 billion and  £40 billion a year. Whilst the understanding of organised crime is becoming clearer year on year, there are however still gaps. To be successful in reducing the harm caused by organised crime it is essential that efforts to combat it are well-directed. This requires investment in developing knowledge and understanding of the threats and of those responsible for them. The harm to the UK comes in particular from a large number of individuals and grou ps operating in tactically astute ways, in response to this the UK has recognised that it needs to improve and will do so by bringing together a wide range of departments and agencies, each with specialist skills and powers  [21]  but whether or not this proves to be successful is yet to be seen. However, in 2010, the Home Office published an evaluation named Drugs Value for Money Review. It pointed out that there was a lack of factual data being collected by the government on the effectiveness of its drug policy against the trafficking of drugs it stated that policies to reduce the availability of drugs produced the greatest analytical challenge. The absence of robust and recognised measures of success, combined with a limited base of research evidence, makes it particularly difficult to draw conclusions about supply-side policy.  [22], so this reiterates the point that in order for the UK to successfully tackle organised crime it needs to put more effort into its research in order to create a higher intelligence to what they are actually trying to tackle.

Ethical Aspects of Marketing - 1455 Words

Ethical Aspects of Marketing Developing a Business Plan August 4, 2009 Ethical Aspects of Marketing Executive Summary This report outlines the social, ethical and legal aspects of marketing. Environmentally Responsible Products Consumers have become more aware of the impact of both production and consumption on the wider environment in recent years. This is acutely apparent in the way products are now packaged. During recent years many companies have assisted in doing their part for the environment by changing their packaging to make it more environmentally responsible. An example of this is McDonalds Family Restaurant phasing out polystyrene burger containers with recyclable paper. McDonalds’ management discovered the potential†¦show more content†¦This case established that the manufacturer of a product has a â€Å"duty of care† to the final consumer, even though they may never come in direct contact with each other. An example of this is HarbourJet Jet-boat Cruises – providing jet boat cruises around the Sydney Harbour. While all care is taken that passengers of the boat are not injured, if an injury occurs it is the customer’s problem unless the driver has been negligent (eg by exceeding speed limits or dangerous driving). When customers buy their tickets one of the contract conditions is that no legal action is to be taken unless there has been an element of negligence on the part of the company. Legislation has been passed in New South Wales in the form of the Sale of Goods Act 1923. Another statute law which governs what suppliers of products can and cannot do is the federal Trade Practices Act 1974, both of which have been extensively amended since first enacted. The law deals with a range of issues in how marketers deal with consumers:  · Deceptive and misleading advertising  · Implied conditions and warranties  · Price Discrimination  · Resale price maintenance Deceptive and Misleading Advertising Part V of the Trade Practices Act deals with consumer protection. â€Å"A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead orShow MoreRelatedMarketing Across Culture Success or Dilemma1130 Words   |  5 PagesTable of contents Marketing across culture: 3 Reasons of this dilemma 3 Proposed solution: 5 Pluralism: 6 Cultural analysis before marketing: 6 Change management strategy: 7 Marketing across culture: Marketing across culture is one of the biggest issues which multinational companies have been confronting nowadays. Since marketing is an important factor for the propagation of a particular product or company, marketing plan should also be effective simultaneously. Every organizationRead MoreTechniques For New Product Development1314 Words   |  6 Pagestechnique involve implementation of marketing plan and strategy on sample or in little population before conducting full marketing plan on the population (Fuller, 2016). In simple, Tommy Hilfiger can market some samples of its clothing line products to the sample population and then analyse the results. 2. Experimentation: This technique consists of reaction of customers. It notes customers reaction for marketing a product more effectively by amending existing marketing as per customers reaction (KahnRead MoreThe Ethics Of An Ethical Code1367 Words   |  6 PagesAn ethical code is a set of morals that a person or group determines to assist their own selves when it comes to decision-making. An ethical code is something that is pretty stable and should not vary based on the context of the situation. Some people form ethical codes that they follow on a micro level, such as only buying American made products from the grocery store, or they could be on a grander scale, such as how a CEO would lead a company. Most successful marketers have a similar ethical codeRead MoreOnline Advertising Methods For Advertising1719 Words   |  7 Pages Online Advertising Methods Background Every day, marketing professional come up with new ways in which they can market their products to consumers successfully. Marketing of products has significantly changed following the invention of the internet. The enormous popularity of the internet in the past decade has opened doors for marketers in a manner that one could not have imagined twenty years ago. Marketers utilize the internet for the purpose of advertising products in a great way than otherRead MoreBook Report On Ethical Decision Making830 Words   |  4 Pages Ethics Hamed Alanazi Book Report Ethical decision-making 10th edition â€Æ' Ethics The book I chose is â€Å"Business ethics: Ethical decision-making† 10th edition is written by O. C. Ferrell, John Fraedrich, Ferrell. It was published by Cengage Learning in 2014. This book consists of almost 340 pages and five parts. According to Amazon this book is among top seller. Something extraordinary about this book is that, this book highlight several cases related to the business ethics that help the readerRead MoreUnit 1 Individual Project Mkt640 – a Managerial Approach to Marketing1444 Words   |  6 PagesManagerial Approach to Marketing November 11, 2012 Abstract This paper reflects challenges brought on by starting up a new product, the effectiveness and efficiency of technology when marketing, and the battle of legal and ethical complication. Given are examples of different situation of each topic to demonstrate how each take place when starting a new product or service. The Marketing Scenario Introduction When bringing a new product or service together there are certain aspects to be consideredRead MoreThe Driving Force Behind A Company s Financial Success Essay1251 Words   |  6 Pagescompany’s ability to market itself. Marketing goes beyond selling of a product. It involves â€Å"building strong brands and a loyal customer base intangible asset that contributes to the value of a firm† (Kotler Keller, 2012). The American Marketing Association, defined marketing as â€Å"Marketing is an activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers† (Kotler Keller, 2012). Since marketing plays such a vital role inRead MoreEthical Issues With Ethical Marketing Essay1333 Words   |  6 PagesIssues with Ethical Marketing Ethical problems in marketing starts with conflicts and disagreements. Each party in the marketing transaction brings expectations of how the business relationship will exist and how the transaction should be conducted. Some ethical problems in marketing research aren’t always the invasion of privacy and stereotyping. Selective marketing is used to discourage the demand from undesirable markets or just by disenfranchising them altogether. Examples of unethical marketRead MoreMarketing Ethics Into The Marketing Process1471 Words   |  6 PagesEthical Marketing Ethical marketing refers to the application of marketing ethics into the marketing process. Ethical marketing is about making marketing decisions that are morally right. The ethics of the marketing decision can incorporate any part of marketing including sourcing of raw materials, staff employment and product advertising and pricing. Sound marketing ethics are usually those that result in consumer satisfaction, with no negative effect, with the goods and services being recognizedRead MoreMarketing Ethics Into The Marketing Process1471 Words   |  6 PagesEthical Marketing Ethical marketing refers to the application of marketing ethics into the marketing process. Ethical marketing is about making marketing decisions that are morally right. The ethics of the marketing decision can incorporate any part of marketing including sourcing of raw materials, staff employment and product advertising and pricing. Sound marketing ethics are usually those that result in consumer satisfaction, with no negative effect, with the goods and services being recognized

Financial Position Of Chevron Corporation In Prospects Relating To Their Liquidity Finance Essay - Free Essay Example

Sample details Pages: 6 Words: 1820 Downloads: 10 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? In this report, I revised the financial position of Chevron Corporation in prospects relating to their liquidity, profitability, efficiency and financial stability. In order to arrive at a decision, I collected Chevrons key financial ratios and used it as a tool to conduct a thorough research. The calculations are showed in this report but sources are referenced to appendices. The results the analysis carried out show that the overall comparative performance of Chevron Corporation to ExxonMobil goes a little above average over 3 financial years but also requires reconstruction in areas like their liquidation and increasing inventory levels. Noting the inelasticity in the energy sector, Chevron was also affected by various economic factors which contributed to their performances. Don’t waste time! Our writers will create an original "Financial Position Of Chevron Corporation In Prospects Relating To Their Liquidity Finance Essay" essay for you Create order HISTORICAL BACKGROUND The ideas of many small business entrepreneurs vary upon their respective objectives but regardless of their goals, they share a single desire success. In the 19th century, an idea was incorporated by the undeterred pioneers Demetrius Scofield and Frederick Taylor in the name of Pacific Coast Oil Company following an oil discovery in Los Angeles, U.S.A. and has been the oldest predecessor of what is identified today as Chevron Corporation. A significant gap from 1879 2010 can only translate success within the organization and to quantify their progress is to say Chevron Corporation has a brilliant corporate strategy and is deeply invested in corporate virtues which over the years has benefited their customers and communities around the globe. Recalling the adventures in the early 1990s across America with increased competition in the petrochemical market and the acquisition of Pacific coast Oil Company by Standard Oil Corporation after lacking potential marketing savvy. They decided to shift their interest to regions that had no history of discoveries Saudi Arabia. Before they were given exploration rights in the region in 1932, Standard Oil Corporation (Socal) had embarked on a quest for oil in other geographical regions like the Philippines and Alaska but proved elusive until 1938 when they made their first international oil discovery in a remote area in Saudi Arabia. During the happy years of the 1950s the worlds largest oil field in Ghawar, Saudi Arabia was discovered by Socal. With series of events that have occurred in over a century, Chevron Corporation has dramatically penetrated many markets with operations in over 100 countries, diversified to be the world leading geothermal energy producing company and engages in upstream (exploration and refining) and downstream (distribution marketing) operations and also in aspects relating to energy and its environment. Chevron Corporation has proved to be self sustainable, financially capable to compete in any given situation although rivalled by other petroleum giants like Royal Dutch Shell, ExxonMobil, and British Petroleum (BP). Chevron Richmond refinery was the first and is situated in the city of Richmond, San Francisco bay, California and was operational years before the incorporation of the city in 1905. As the years progressed, other refineries were opened in El Segundo in California, Pascagoula in Mississippi and Yeosu in South Korea. These refineries have created many job opportunities for different cultural backgrounds over the years. Chevron Headquarters was previously located in San Francisco but later moved to San Ramon, California after being sold in 1999. ANALYSIS PERFORMANCE APPRAISAL With the information from Chevrons 3 years financial report, I was able to produce key financial ratios that are significant to the organization. The tables and charts below will assist in translating the meaning of these ratios and a description of the ratios effect within the organization is also expressed. Basically, the first ratio which is identified is the liquidity ratio which demonstrates the ability of the organization to meet its short term debt obligation by converting asset to cash. By reading this section of this report, you will comprehensive understanding of Chevrons financial position. Liquidity Ratios millions 2009 $ 2008 $ 2007 $ Current Ratio = Current Asset/ Current Liabilities 37216/26211 = 1.4 36470/32023 = 1.1 39377/33798 = 1.2 Quick Ratio = Current Asset Inventories / Current Liabilities 37216 5529/ 26211 = 1.2 36470 6854/ 32023 = 0.9 39377 5310/ 33798 = 1.0 From an analytical point of view and noting the volatility in the liquidity ratios, some of the figures on the table above can be regarded acceptable given that Chevron demonstrates the ability in settling its short-term obligations. However, with critical analysis, it will show that the current ratio of 2008 particularly had an adverse affect because their inventories which are usually valued at a LIFO basis (Last In, First Out) took a capital loss. Inflation was an essential factor that contributed to what would have been a tax advantage to tax liability. Therefore, the applied LIFO liquidation method suffered during this period (old inventories was sold at the current price), ensuing the replacement cost to be greater than the inventory. Similar deficits occurred in 2009 but not as critical as the years before. In a more conservative approach, Chevrons 2008 quick ratio is quite revealing in interpreting their dependency on their inventory. There was declination of current asset in 2008 compared with 2007 (See Appendix 2). To stringently determine the liquidity of Chevron we need to review both liquidity ratios and observe the time interval of the conversion of capital assets to cash. Figure 1.0 Comparative Liquidity Ratio There are significant differences between the current ratio of Chevron and its competitors e.g. ExxonMobil and BP. ExxonMobil steals a 1.47 current ratio in 2007 and maintains the same figure in the following year but drops at 2009 to ~1.1 while BP had a 1.04 in 2007, declined to 0.95 in 2008 as a result of their current liabilities exceeding their current asset but recovered in 2009 with a 1.14. By average performance, ExxonMobil would appear to have better liquidity management over the 3 financial years. In terms of feasibility, Chevron compared with the other competitors, has a higher tendency to reach a target current ratio above 2.0 in the next 3 financial years because of the recent surge in demand of inventories across the market (WikiWealth, (2009) Chevron Stock Research Investment News CVX, https://www.wikiwealth.com/research:cvx, October 27, 2010). This will create room for flexibility and responsiveness in debt settlement and other obligations. Profitability Ratios millions 2009 % 2008 % 2007 % Net Profit Margin = Net Income/ Net Sales 10483/171636 = 6.1 23931/273005 = 8.8 18688/220904 = 8.5 Return of Equity = Net Income / Shareholders Equity 10483/91914 = 11.4 23931/86648 = 27.6 18688/77088 = 24.2 Return of Asset = Net Income / total Asset 10483/164621 = 6.4 23931/161165 = 14.8 18688/148786 = 12.6 Chevrons profitability structure is reliant on the earnings of its upstream and downstream business segments which are hung on the changes of oil prices. The profitability ratios of 2007 and 2008 reflect high earning which in return has produced good equity for investors. However, the upstream business segment which is particularly instrumental in generating higher profits than the downstream experienced some cost reduction at the end of 2008, during the wake of the recession; which had an impact on their net profit downsizing the Return of Equity for 2009. Regardless of the fluctuating financial situation, Chevron reported a substantial profit margin which is above industry average following the increase in net income except for 2009 being as a result of cost reduction. The return on asset from 2007 2008 shows how effective they are using their asset, though there was a sharp drop in 2009, it is not very harmful in a long run. For the income statement, see appendix 1. Figure 1.1 Comparative Return of Equity Chart According the chart above, ExxonMobil appears to take the lead from equity returns with a 17.4, 38.5 and 33.4 in 2009, 2008 and 2007 respectively whereas Chevron reported a 11.4, 27.6 and 24.2 in 2009, 2008 and 2007 respectively but for long term investment in the oil sector, Chevron would be a better option because ExxonMobil will have huge deficits from their incurring debts which will probably feed on their assets. Operational Efficiency Ratios millions 2009 % 2008 % 2007 % Asset turnover = Net Sales / Average total asset 171636 / 82310 = 2.1 273005/80582 = 3.4 220904/ 74393 = 2.9 Inventory turnover = Sales / Inventory 171636/5529 = 31.04 273005/6854 = 39.83 220904/5310 = 41.60 Evaluating Chevrons inventory turnover for these 3 consecutive years has proved tricky. In 2007 and 2008, the sales and orders that had to be met was relatively high which in return produced sharp profit but in 2009, Chevron incautiously increased their inventory without corresponding with the demand and that had an effect on the profitability. The cost of storing these inventories was a contributing factor. With relationship to their asset turnover, revenues were not generated as expected since they were dependent on their inventories. We should not be pessimistic because it is very typical in the industry as oil prices were hiked. I assume Chevron did nott take into account the recession effect on consumers although oil is a dominant commodity it is not immune to recession. Figure 2.0 Comparative Inventory Turnover Ratios ExxonMobil scored a 26, 39 and 35 for 2009, 2008 and 2007 respectively proving that Chevron has a better inventory turnover and would not necessarily need to deplete its existing inventory to match its competitor but rather ExxonMobil will subjectively have to improve. Leverage Ratios millions 2009 $ 2008 $ 2007 $ Debt to Equity Ratio= Total liabilities / Shareholders Equity 72707/91914 = 0.79 74517/86648 = 0.85 71698/77088 = 0.93 Interest coverage ratio = EBIT / Interest Expense 18556000/28000 = 662.7 N/A 32440000/166000 = 195.4 In order to arrest debts, a decrease in Chevron D/E ratio subsequently from 2007 conveys that financial activity by investors is relatively proportional with the liabilities of the company. Funding with debts is not particularly harmful because it increases shareholders returns. In this case the stockholders have control of the organization. Hypothetically, if the D/E margins went above 1 and maintained that for another 3 consecutive years, the severity of the situation could be identified as a pathway to financial distress. Figure 2.1 Comparative Debts/ Equity Ratio The idea for comparing ratios with industry competitors like ExxonMobil is to measure the growth of Chevron even though ExxonMobil has bigger asset. Here is the interesting part, ExxonMobil showed D/E ratio of 0.98, 1.01 and 1.1 for 2007, 2008 and 2009 respectively. This is as a result of using total shareholders equity to fund operations and this reduced equity returns and shoots liabilities. COMPARATIVE SUMMARY ENTERPRISE VALUE Company Revenue EBIT Depreciation Amortization EBIT Chevron 1.0x 5.5x 9.1x Exxon Mobil 1.0x 6.8x 9.1x Industry Average Value is 1.0x, 5.4x, 8.6 respectively Margin of Safety/ EV Potential Increase: Chevron Corporation 28% ExxonMobil 15% Though its notoriously difficult to determine a companys earnings, their margin of safety for investment does not really guarantee returns for investors but creates room for errors by analyst compared to ExxonMobil. CONCLUSION Chevron is known for having a reputable dividend distribution record and its ability to produce excellent returns to its shareholders. Chevron is also known for having an efficient operating model which makes it an attractive asset for long term investment. Judging by Chevrons performance of being able to increase its dividend for 23 consecutive years, ideally investors will continue to display a plausible investment. Chevrons annual turnover for the 3 financial years has been impressive with a market cap of about $168.32B and they have shown effective management of cost. Chevron has good reserves of 3.0 Billion Barrels and a sound financial metrics but from my evaluation, Chevron seems to be lacking in few areas like their liquidity, it was reported that as at 2009, Chevron laid off some workers due to their inability to meet certain obligations. Chevron has a decent financial background and has kept operations at minimal, maybe they need to diversify to areas that are not solely dependent on oil. This will ensure a competitive advantage for them or rather replenish an inventory that will produce attractive financial return for their investment.