Precup Andrei Anton Content

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY
ACKNOWLEDGEMENTS
I would never have been able to finish my final project without the guidance of INDE and
CNAM professors, without the help of my friend who provided me with a subject for the final
project and without the unconditional support from my family.
I would like to express my deepest gratitude to my advisor, Prof. Univ. Dr. DOREL MIHAI
PARASCHIV, for his excellent guidance, caring, patience and providing me with excellent advices
for my final project.
1. Introduction
When the MBA courses where finished and I was in the position to choose a subject for my final
project I have found myself in a strange position. As an owner of a business consultancy company I
had a number of past projects that were already available, but its always easier to make plans when
you have millions available because, as they say, the first million is the hardest to make.
So I started looking around to find something close to a start-up to help grow and evolve. My
best friends were the first to discuss with and I immediately found the subject I was looking for.
Mr. Alexandru Obretin is a medic, owner of Loxan Magnus Medical SRL that activates on the
private healthcare market in Romania.
The company, Loxan Magnus Medical, was established in 2005 and activated until 2012, solely,
on the field of occupational health services, providing private and state owned companies or
institutions with services required by the Romanian legislation.
The company LMM (Loxan Magnus Medical) grew steadily from 2005 to 2008 when it reached
its peak, registering a net profit of 40.000 Euro on a 100.000 turnover.
In 2009 the economic and financial crisis struck Romania and the turnover as well as the profit
diminished in 2010 to a minimum of 2.000 Euro profit on 80.000 Euro turnover.
Since then LMM struggled to stay afloat on the rapid expanding private healthcare market of
Romania and understood it was time to expand its business portfolio including family medicine
(general practitioner), medical optics and medical home care services. The general practitioner
office was included in LMM through the acquisition of a list of clients from a retiree family doctor,
medical optics and medical home care were developed into two daughter companies: Loxan Optics
in 2013 and LMM homecare in 2014. The total turnover went up to 140.000 Euro in 2014 and the
overall net profit registered a promising 26.000 Euro.
After extended discussions with the management in charge with the 3 companies we came to the
conclusion that further diversification of their business portfolio is needed in order to grow the
cumulated turnover and at least maintain the profit margin in the years to come.
The purpose of this MBA project is to analyze the current performances of the companies,
identify the problems they are facing, propose solutions to those problems and last but most
important, give solutions for the future expansion of their business.
2. Diagnosis analysis
4
2.1. Romanian health system

The health system in Romania is a social insurance with the aim to ensure an equitable and nondiscriminatory access to a basic service package for policyholders.
The share of public health expenditure in GDP varied but stayed generally at a low level which
affected system maintenance, management, equipment investments and access to services for
people with low income - which includes mostly old people.
Percentages of GDP public expenditure allocated to health in 2014 in Romania were at a very
low 3.1% of GDP.
In the current Romanian context, the establishment of private health facilities was necessary in
several ways, including: providing the best medical services, high efficiency; integrating existing
workforce; high quality nursing. The development of private medical system stimulates competition
and has positive effects on quality of care.
The coexistence of both public and private medical systems is a reality in all countries and
ensures a healthy development of the medical market, with direct benefits for patients. In recent
years, the private sector was a serious competitor of the public health system, which appears as a
solution cumbersome, rigid and hard to improve.
The legislation clarification in the field of health insurance and for the establishment of medical
offices and private health care centers, although there are strict rules for their accreditation from the
Minister of Health, the College of Physicians and the Health Departments, has increased the number
of private medical facilities.
The existence of private medical facilities, especially given that Romania faced a decrease in the
number of public hospitals, brings two major benefits:
- Serves the population with remarkable social impact
- Creates financial benefits for medics and investors
Private healthcare has a high risk because it involves major investments with a hypothetical and
very difficult to measure profit margin.
The expansion of the private clinics compared to the lack of investments in the public sector
and low salaries in the system, are prompting doctors to consider private units as a viable
"alternative" to the public system.
There are no statistics of the number of doctors who leave the state system, nor for those
working in parallel at the state and private systems.
Existing data, of the Ministry of Health and of the National Institute of Statistics does not
provide concrete information about this topic, statistics showing only doctors who work in the
private system without stating whether they have service contracts in the public domain as well.
5

Thus, according to the two institutions in 2011, the number of doctors who work in the private
system has reached 11.028, given that in 2005 amounted to less than half. [6]
From 2010 to 2014 there was a steady but slow increase in the number of doctors working in
the private sector.
Table 2.1.1. Total number of physicians between 2005 2010 and 2014
Year
Total nr of physicians, from Physicians which work in
which:
the private system
2005
47.388
5.055
2006
46.936
5.481
2007
48.199
6.463
2008
50.267
7.568
2009
50.386
8.525
2010
52.204
11.028
2014
54.929
14.271*
*No data available on the number of physicians working exclusively in private; it is possible that
some of those working in the private sector have work contracts in the public system as well. [1]
2.2. Private healthcare market - the clients

Most, if not all, of the private system clients are patients in the public health system as well.
Those who get treatment in the private system are generally people with over the medium income.
They are expecting much more from the public health care system and are willing, in the same time,
to pay more in order to receive more.
Statistical studies showed that 45% of Romanians prefer to be treated at a private clinic.
Most consumers of private healthcare segment are aged 18-40 years, come from large cities, have
higher social status and superior studies.
Change of mindset is the main trend of the market. In conditions where only 1% of the
population has private health insurance, this trend shows that the move to integrated medical
services in the private system, coupled with a system of private insurance, represents the future of
this sector.
In the last 2-3 years, the market maturation continues and there is a change of mentality that is
perceiving and even if it does not take place at an accelerated pace, it has enough consistency to
develop and enforce major changes in the market of private medical services and an obvious
growing interest for this type of services in the urban population, especially active people, adults
and young people or young families with higher education, whose incomes are above average and
are responsive to daily news in private medical sector. [4]
Apart from this trend there are companies (the multinational companies are used with a certain
way of making business) that gave their employees subscription based health services that provide
6

gratuity, inside the private system, for the basic medical analyzes and discounts on most of the
medical services rates from a certain private clinic or hospital.
A certain amount of the prices charged by the private system on medical analyzes,
investigations and hospitalization are paid by the National Health Insurance (public system). [9]
Although their financial strength is further limited by the low standard of living, the private
system is expanding year after year.
Main client categories for the private medical system are:
-
Corporate
Paying population
The state (basic package available at the state or private owned hospitals and clinics)
2.3. Private healthcare market the competitors.

Private medical services market is growing, but operators competition is felt especially in large
cities where there are enough potential customers with over the medium and high income. As
expected, the capital city is the main attraction for investments in private health care.
Most private hospitals in Bucharest are owned by MedLife (3 units) and the network CMU (2),
the two companies being also the largest operators of private medical services on the Romanian
market. The most important investments were made for Sanador and Monza hospitals, medical units
which involved the allocation of 40 million for each project.
The oldest private hospital (Euroclinic) is part of the operator network CMU and was
inaugurated in 2005 and the newest investment was made by Gral Medical in 2013 with the
Hospital OncoFort.
Currently, in Bucharest, there are 12 large private hospitals, most opened in the last three years,
total investment approaching 200 million. These private medical units have a capacity of 1,200 beds
and cover a broad range of medical specialties. [5]
Private medical services market is growing, although prolonged economic crisis has affected
Romanians budgets. According to statistical data presented in the study MEDIBUS 2013 the market
for private healthcare services (excluding subscriptions medical and dental services) has seen a
steady growth over the years reaching in 2013 around 131 million in Bucharest (81 million in
2009) and about 176 million to the Province (cities + 100,000 population) (from 105 million in
2009). [7]
The main reasons are:

continued expansion of private clinics and medical offices and laboratories and private hospitals
while increasing their ability to treat patients;
Professionalism and courtesy of staff and better and better technical equipment of clinics and
private hospitals;
Financial difficulties and the precarious state of public health system.
The total private medical services market in Romania reached in 2014 about 570 million euros.
From the total market of about 570 million euro, 350 million euro represents the value of services
paid by the state and the rest payments by the population and corporations. The total market for
medical services (private and public) exceed EUR 5.5 billion in 2013. [8]
Below there is a comparison between year 2009 and year 2014 for the first 4 big players on the
private healthcare market in Romania
Table 2.3.1 Year 2009 - The big four
Medlife
CMU
Sanador
Medicover
Lei
109.183.887 57.663.067 40.871.699
48.995.089
Turnover
Euro
24.668.750 13.028.257 9.234.455
11.069.835
Lei
10.390.236 12.761.105
775.996
269.416
Net Profit
Euro
2.347.545 2.883.214
175.327
60.871
Profit margin
9,52%
22,13%
1,90%
0,55%
Source Ministry of Finance, public data
Table 2.3.2. Year 2014 - The big four
Medlife
CMU
Sanador
Lei
251.092.044 200.914.994 176.770.378
Turnover
Euro
56.731.144 45.394.260 39.939.082
Lei
9.416.261
7.528.907
6.627.406
Net
Profit
Euro
2.127.488
1.701.063
1.497.380
Profit margin
3,75%
3,75%
3,75%
Source Ministry of Finance, public data
Medicover
58.845.990
13.295.524
-4.062.609
-917.896
-6,90%
This big increase in turnover for the first 3 players is realized through continuous investments
in expanding with new clinics and diversifying services.
From the INSSE (National Institute of Statistics) data we can see how the private sector in
Bucharest area developed from 2009 to 2013 (from 2014 only the number of private hospitals is
available - 33)
Table 2.3.3. Private medical units inside Bucharest area 2009/2013
Types of medical units
2009
Hospitals
2013
5
29

Ambulatories integrated to hospitals
1
12
Clinics
117
156
Centers for diagnostic and treatment
9
11
Medical specialty centers
93
122
Family medical offices
427
496
Specialty medical offices
832
1291
Medical laboratories
43
122
Other types of medical offices
34
44
1998 - 2015 INSTITUTUL NATIONAL DE STATISTICA
From the statistics above one can clearly see that only the number of hospitals had an important
growth while the other types of medical units grew but did not register a leap forward in terms of
numbers.
This means that big players continue to invest in the sector while the medium size and small
companies are struggling to stay afloat.
Year 2014 was a year with relatively large variations in economic terms, with direct influence
on business environment.
Analyzing the data available we have seen the development of private medical services market
in Romania slowing in 2014 compared to previous years. For private operators of medical services
was a year of prudence, even though it kept a growing trend for turnover.
For 2015 no major signs of change loom over last year, so that specialists say the economic
evolution is rather moderate growth, at least for the first part of 2015.
However investment in branding and marketing initiatives toward population, anticipates the
moment when the demand for health care in the private system, will raise.
Areas of differentiation between units competing in the private health care market are divided
equally between continue investment in latest technologies and the ability to communicate with
patients, arguments that always lead to the attraction of new beneficiaries of private medical
services. For big players in the medical services market differentiations are more and more linked to
reputation following the results obtained from medical practice, brand awareness and loyalty that
patients develops to the brand.
One of the main problems facing the private medical system is the subject of simplifying
procedures relating to contracting funds available to health care providers through the National
House of Health.
There is a real problem in terms of patients paying for medical services provided by private
establishments and that they may receive limited or no health insurance from the State, even if they
contributed by paying monthly fees to the National Health Fund.

To summarize all of the above the competition is fierce on the private market of medical
services. There are very big players, a few medium size and a lot of the small size players with
turnovers up 100.000 euro/year.
When you have so many competitors and you are struggling to get from a small size to a
medium size company you have to take advantage on all the information that is around you from the
players on the market. You must copy what they have done to be successful and you have to avoid
the mistakes others are making or have made in the past.
To make profit in this business is very important to take into consideration aspects
regarding location, characteristics of served population, the necessary financial investments,
quality of health care, and existence of an appropriate working space for the task at hand and
last but not least important, cost control.
2.4.
Diagnosis analysis of LMM and its daughter

companies
2.4.1. Brief overview of the analyzed companies

Brief history
The private medical services unit operates in three companies:
Loxan Magnus Medical SRL
Loxan Optics SRL
LMM HOME CARE SRL
In 2005, Mr. Alexandru Obretin founded Loxan Magnus Medical SRL with the main activity
in the field of occupational health services. After the crisis he developed within the same company a
general practitioner office and several other specialty medical offices.
In 2012, Loxan Optics SRL was founded, a company that operates in the field of medical
optics and provides diopter loss or gain diagnosing and sells eyeglasses, frames for eyeglasses and
contact lenses.
In 2014, LMM Home Care SRL was born with the aim to provide home care health services.
According to the documents presented the 3 companies are presenting as follows:
Table 2.4.1. Analyzed companies
Nr.
1
2
Name
Loxan Magnus
RC registration number
Main activity
Medical
J40/860/2005
Occupational
10
Loxan Optics
LMM Home
J40/4507/2012
Medical optics
Care
J40/2325/2014
Home care

3
Employees with permanent
health medicine
24
services
2
health services
3
contract
Economic activites and clients
1. Occupational health services activity assesses the risk of occupational disease and
monitors the health of employees. According to H. G. No 355/2007 GD completed. 1169/2011
employers in every field of activity, both public sector and private sector are required to comply
with regulations on the health supervision of workers. The company provides this service for a
number of 2.500 workers from different companies in the private and public sector, each year.
The financial benefits are based on payments made by companies.
2. The activity of general practitioner (family medicine) provides continue medical care for a
portfolio of 1,400 active patients.
The financial benefits are based on payments made by National Health Insurance System.
3. The medical offices are for the following specialties:
Internal Medicine - diagnoses
Ophthalmology -diagnoses
Neurology -diagnoses
Psychiatry and psychology diagnoses and counseling
Orthopedics and Rheumatology - diagnoses
Dermatology diagnoses and small treatments
Geriatrics - diagnoses
Surgery small treatments
The financial benefits are based on payments made by population out of their own pocket or
by payments made by the National Health Insurance System.
4. The home care health services provide the possibility to continue treatment recommended
by your doctor prior to leaving the hospital.
The financial benefits are based on payments made by National Health Insurance System.
5. Medical optics diagnoses diopter loss of gain by an optometrist and sells eyeglasses,
frames for eyeglasses and contact lenses.
The financial benefits are based on payments made by population.
Location of business
Principal place of business is located in the Bucharest city center, on a secondary street, with
no visibility and no parking places for customers.
11

All three companies are active in this office arranged as a single unit of private medical
services that has a reception and a waiting area for patients.
Family medicine activity takes place both at the headquarters and at branch located in the 6th
Sector of Bucharest, on a secondary street, inside a factory
2.4.2. The human resources

"Every aspect of an institution activity is determined by competitiveness, motivation and effective
organization of the staff. Of all the management tasks, the management of the human element is the
most important because it depends on how well things are done in an organization."Rensis Linkert
After discussions with the managers of the medical units I understood that they are guided
by the following principles:
- Guaranteeing the quality and safety of the medical act
- Ensuring high standards of professional competence and encouraging their continuous
development
This shows a vision centered on patient (client) which is normal for this type of business.
All 3 companies are managed by the same people and they share for their economic
purposes the same support staff, therefore the human resource analysis will be made as if they were
one company.
Human resources structure analysis includes the following criteria:
main categories of employees;
type of contract;
gender;
work experience;
current job seniority;
age;
In period 2012-2015 the human resources structure of the three companies is presented in the
following tables:
Table 2.4.2.1 Human resources by main categories of employees
Human resources after main categories of
2012
2013
2014
2015
employees
Total nr of employees - regardless of contract
11
18
21
29
type from which:
Medics
3
8
9
14
Nurses
6
8
9
11
Support staff
2
2
3
4
12

Table 2.4.2.2 Human resources by type of contract
Human resources by type of contract
Total nr of employees - regardless of time
worked from which:
Employees with collaboration contract
Full time employees
Half-time employees
Table 2.4.2.3 Human resources by gender
Human resources by gender
Total nr of employees - from which:
females
males
2012
2013
2014
2015
11
18
21
29
1
9
1
1
15
2
1
16
4
2
21
6
2012
11
7
4
2013
18
10
8
2014
21
11
10
2015
29
14
15
6-10 years
11-15
years
Table 2.4.2.4 Human resources by work experience year 2015

Human resources by work experience year
< 1 year 2-5 years
2015
Medics
Nurses
Support staff
Table 2.4.2.5 Human resources by current job seniority year 2015

Human resources by current job seniority
< 1 year 1-2 years
year 2015
20
3
Medics
10
2
Nurses
8
1
Support staff
2
12
10
2
14
4
9
1
2-3 years
3-5 years
4
2
1
1
1
1
Table 2.4.2.6 Human resources by age year 2015

Human resources by age year 2015
< 25 years
25-30
years
Medics
Nurses
Support staff
3
3
Table 2.4.2.7 Indicators for highlighting labor movement

13
30-35 years >35 years

10
13
6
4
8
4
1
Nr
1
2
3
4
5
6

Indicators for highlighting labor
2012
2013
2014
movement
Employees
11
18
21
Staff entries
8
10
12
Staff exits
3
3
9
Entries coefficient, Ki ( 2/1)
0,73
0,56
0,57
Exits coefficient, Ki ( 3/1)
0,27
0,17
0,43
Total movement coefficient, K (2+3)/1
1,00
0,72
1,00
2015
29
20
12
0,69
0,41
1,10
Figure 2.4.2.8. Current organizational chart
General
manager
Medical
manager
Support staff
3 persons
Accounting
1 person
Nurses
11 people
Medics
12 people
These data were correlated with information from the external environment resulting in the
following SWOT analysis.
Table 2.4.2.9 Human resources SWOT analysis

STRENGHTS
WEAKNESSES
diversification of services is followed by Very high fluctuation of employees.
increase in dedicated personal;
opened to new people
OPPORTUNITIES
the National Health System is not
THREATS
excessive birocracy
attractive to young or old professionals
peoples resistance to change

14

legislation instability
high demand for medical personal in UE
countries (much higher salaries)
Another intersting fact that points out from human resource analysis is that there is no
marketing department. From the discutions with the managers I understood that marketing is done
by mouth-to-mouth method and personal networking.
2.4.3. Turnover and profit evolution

The cumulated financial results in terms of turnover, net profit and margin of profit for year
2014 relative to previous years are presented in the following table.
Table 2.4.3.1 Cumulated results 2008-2014
Turnover, Euro
Profit/Loss, Euro
Profit margin
2.008
2.009
100.000 75.000
40.000 15.000
40,00% 20,00%
2.010
2.011
80.000 80.000
1.800 10.000
2,25% 12,50%
2.012
2.013
2.014
90.000 114.000 140.000
7.600
5.200 23.600
8,44% 4,56% 16,86%
For year 2014, we can see a decrease in expenses resulting in an increase of the profit
margin by more than 10 %.
Turnover, net profit/loss and profit margin individualized on each of the companies in the
group are presented in the following table :
Table 2.4.3.2 Financial results at 30.06.2015
Year 2015
Turnover, RON
Net Profit/Loss , RON Net Profit Margin, %
Loxan Magnus Medical

251.093
25.871
10,30
Loxan Optics
11.583
-2.041
-0,17
LMM Home Care
122.830
40.345
32,85
TOTAL
385.506
64.175
16,64
We can clearly see that LMM Home Care is the best performer while Loxan Optics is
registering loss.
From discussions with the management I understood that the expected turnover at the end of
the year 2015 will be double that registered at 30.06.2015.
Table 2.4.3.3 Comparative results 2014 versus estimated 2015
Turnover, Euro
Profit/Loss, Euro
Profit margin
2,014
140,000
23,600
16.86%
2,015
172,000
28,700
16.69%
Therefore we can plot the evolution of cumulated results in order to see the trend of growth
15

Figure 2.4.3.4 Evolution of cumulated financial results 2008-2015
From the plot we can see a linear growth for both turnover and for profit although the slope of the
turnover is steeper.
2.4.4. Diagnosis analysis based on return rates

Because from previous chapter we can see a linear growth from 2013 onward and because
year 2013 was the year when Loxan Optics was established announcing a change in strategy I will
analyse the rentability rates of every company for 2013, 2014 and at mid 2015.
Profitability can be defined as the ability of an enterprise to gain profit by using production
factors and capital, regardless of their origin. For expressing profitability we can use two categories
of indicators: profit and return rates. The absolute magnitude of profitability is reflected by profit,
and the degree to which capital or enterprise resource usage contributes to profit is reflected in the
rates of return (indicator of the relative size of profitability).
Table 2.4.4.1 Net profit at Loxan Magnus Medical
31.12.2013
Name
1. Operating income
486.589
2. Financial income
228
3. Exceptional income
0
4. Total income
486.817
5. Operating expenses
436.475
6. Financial expenses
2.168
7. Exceptional expenses
0
8. Total expenses
438.643
16
31.12.2014
497.403
5
0
497.408
414.274
2.682
0
416.956
30.06.2015
251.094
2
0
251.096
217.828
1.100
0
218.928

9. Operating result
50.114
83.129
10. Financial result
-1.940
-2.677
11. Exceptional result
0
0
12. Brut profit
48.174
80.452
13. Taxes on profit
9.588
15.607
12. Net profit
38.586
64.845
33.266
-1.098
0
32.168
6.297
25.871
Table 2.4.4.2 Net profit at LMM HOME CARE

31.12.2014
110.070
3
0
110.073
56.093
0
0
56.093
53.977
3
0
53.980
3.303
50.677
Name
1. Operating income
2. Financial income
4. Total income
8. Total expenses
9. Operating result
12. Brut profit
13. Taxes on profit
12. Net profit
30.06.2015
122.830
1
0
122.831
78.801
0
0
78.801
44.029
1
0
44.031
3.685
40.346
Table 2.4.4.3 Net profit at Loxan Optics

Name
1. Operating income
2. Financial income
4. Total income
8. Total expenses
9. Operating result
12. Brut profit
13. Taxes on profit
31/12/2013
23.410
127
0
23.537
38.660
0
0
38.660
-15.250
127
0
-15.123
0
17
31/12/2014
11.009
0
0
11.009
25.247
0
0
25.247
-14.238
0
0
-14.238
0
30/06/2015
11.583
0
0
11.583
13.277
0
0
13.277
-1.694
0
0
-1.694
0
12. Net profit

-15.712
-14.568
-2.042
The activity of Loxan Magnus Medical and LMM Home Care in analyzed years ended with
positive net profit and the activity of Loxan Optics analyzed ended with a negative net profit.
Company profitability analysis using efficiency indicators
The return rate is a ratio between an expression of profit and assets or capital (own,
permanent) or a workflow indicator (turnover, resources consumed, etc.).
Different forms of rates of return have various information values and reflect many
economic and financial aspects regarding the activity of the company.
The main operational rates considered for the financial analysis of the company are: the
profit margin, return on assets and return on equity.
Operating margin
The operating margin relates the net total profit and the turnover, as an expression of the
company's commercial policy.
The formula is:
PM= NP/TO * 100
Where:
Np net profit
TO turnover
Table 2.4.4.4 Profit margin at Loxan Magnus Medical

Name
31.12.2013
31.12.2014
1. Turnover (TO)
486.589
497.403
2. Net profit (Np)
38.586
64.845
3. Profit margin (PM) -% (2/1*100)
7,93
13,04
Table 2.4.4.5 Profit margin at LMM Home Care
Name
31.12.2014
1. Turnover (TO)
110.070
2. Net profit (Np)
50.677
46,04
Table 2.4.4.6 Profit margin at Loxan Optics
Name
31/12/2013
1. Turnover (TO)
23.410
2. Net profit (Np)
-15.712
18
31/12/2014
11.009
-14.568
30.06.2015
251.094
25.871
10,30
30.06.2015
122.830
40.346
32,85
30/06/2015
11.583
-2.042

-67,12
-132,33
-17,63
A pozitive net profit margin is a measure of the efficiency of the company (the higher the
rate the better) and a negative net profit margin means that the company is unprofitable. For 2015
the net profit margin is reprezented in the following figure.
Figure.2.4.4.7 Net profit margin on 3 companies 2014 versus 2015 (Loxan optics figures
were downsized 4 times)
50
40
30
20
10
0
-10
LMM
-20
Loxan optics
-30
LMM home care
-40
2014
2015
Return on assets
The return on assets(ROA) is an indicator of how profitable a company is relative to its total
assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings.
The formula is:

ROA = Np/TA * 100
Where:
Np net profit
TA total assets
But we should consider a rate of return that is free from interests and taxes as those are
dependent on government and bank policies
Therefore we will calculate the return on total assets.
ROTA = EBIT/TA * 100
where:
EBIT = earnings before interest and taxes;
AT = total assets
ROTA of the 3 companies is presented in the following tables.
19

Table 2.4.4.8 ROTA for Loxan Magnus Medical
Name
31.12.2013
31.12.2014
1. Total revenues
486.817
497.408
2. Total assets -TA
212.596
238.422
3. EBIT
48.174
80.452
4. Return on total assests (ROTA) -% (3/2*100)
22,66
33,74
Table 2.4.4.9 ROTA for LMM Home Care
Name
1. Total revenues
2. Total assets -TA
3. EBIT
4. Return on total assets (ROTA) -% (3/2*100)
Table 2.4.4.10 ROTA for Loxan Optics
Name
1. Total revenues
2. Total assets -TA
3. EBIT
4. Return on total assets (ROTA) -% (3/2*100)
31.12.2014
110.073
62.813
53.980
85,94
30.06.2015
251.096
268.046
32.168
12,00
30.06.2015
122.831
79.085
44.031
55,68
31/12/2013
23.537
11.020
-15.123
31/12/2014
11.009
8.979
-14.238
30/06/2015
11.583
13.603
-1.694
-137,23
-158,57
-12,45
ROTA is positive and over 10% (all big players on the market have below 10% ROTA) for
LMM and LMM home care but is negative for Loxan Optics.
Figure 2.4.4.11 ROTA on 3 companies 2014 versus 2015 (Loxan optics figures were
downsized 4 times)
100
80
60
40
20
0
LMM
-20
-40
Loxan Optics
LMM home care
2014
2015
20

Given the fact that Loxan Optics had loss every year of its 3 years existence I will not
analyze this company any further because indicators or rates that one may calculate are off limits.
Return on equity
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' investments.
It shows net income as percentage of shareholder equity.
Must cover the current interest rate. A too high value of the indicator can also mean low
social capital, which must mobilize shareholders to adequate capital to business size. The current
interest rate on bank deposits for one year is used as a benchmark. The first and most simple
financial investment is to leave your money in the bank, and next to an investment fund. Or an
investment in another business should exceed the gain obtained by depositing money in the bank.
The formula is:
ROE = (Np/SE) x 100, where: Np net profit and SE shareholders equity
Tabel 2.4.4.12 ROE for Loxan Magnus Medical
31.12.2013
Name
1. Net Profit (Np)
38.586
2. Total income (TI)
486.817
3. Total assets (TA)
212.596
4. Total liabilities (TL)
55.607
5. Shareholders equity (SE)
156.989
Net margin (1/2)
0,08
ROA (2/3)
2,29
Debt/Equity + 1 (4/5+1)
1,35
6. ROE (%) (1/5*100)
24,58
Tabel 2.4.4.13 ROE for LMM Home Care
Name
1. Net Profit (Np)
Net margin (1/2)
ROA (2/3)
Debt/Equity + 1 (4/5+1)
6. ROE (%) (1/5*100)
31.12.2014
64.845
497.408
238.422
72.588
165.834
0,13
2,09
1,44
39,10
31.12.2014
50.677
110.073
62.813
11.936
50.877
0,46
1,75
1,23
99,61
30.06.2015
25.871
251.096
268.046
116.186
151.860
0,10
0,94
1,77
17,04
30.06.2015
40.346
122.831
79.085
12.862
66.223
0,33
1,55
1,19
60,92
Analyzing the data above we can see that ROE is a little over the interest rate on bank deposits
for LMM. A very high value, as registered at LMM home care, might mean that shareholders
equity is too low and this should mobilize the shareholders to increase the equity to the value
requested by the size of the business.
21

Factorial analysis of ROE can be made using the following model:
ROE
TI TA Np
100 where:
TA SE TI
TI
- rotation speed of total assets expressed by number of rotations;
TA
TA
- multiplication factor of shareholders equity;
SE
Np
- net rentability of total income.
TI
Table 2.4.4.14. Factorial analysis of ROE for Loxan Magnus Medical

31.12.2013
31.12.2014
Name
1. Net Profit (Np)
38.586
64.845
486.817
497.408
212.596
238.422
55.607
72.588
156.989
165.834
6. ROE (%) (1/5*100)
24,58
39,10
7. Rotation speed of total assets (2/3)
2,29
2,09
8.Multiplication factor of shareholders
equity (3/5)
1,35
1,44
9.Net rentability of total income(1/2)
0,08
0,13
Table 2.4.4.15. Factorial analysis of ROE for LMM Home Care

31.12.2014
Name
1. Net Profit (Np)
50.677
110.073
62.813
11.936
50.877
6. ROE (%) (1/5*100)
99,61
7. Rotation speed of total assets (2/3)
1,75
8.Multiplication factor of shareholders equity (3/5)
1,23
9.Net rentability of total income(1/2)
0,46
30.06.2015
25.871
251.096
268.046
116.186
151.860
17,04
0,94
1,77
0,10
30.06.2015
40.346
122.831
79.085
12.862
66.223
60,92
1,55
1,19
0,33
Using this model one can draw the following conclusions :

- rotation speed of total assets decreased for both companies-this might mean that some
activities recently implemented are not yet at their optimum values;
- multiplication factor of shareholders equity is quite high this translates into a high
rentability of shareholders equity.
22

- net rentability of total revenue is increasing slowly for LMM (still being 2 folds bigger
than the one registered by the big players on the same market) and for LMM home care is
decreasing (but still is at very high values).
2.4.5. Patrimonial balance sheet and rates

In the following tables you can find the simplified annual balance sheets for the 3
companies.
Table 2.4.5.1. Simplified annual balance sheets for Loxan Magnus Medical
Assets
31.12.2013
31.12.2014
30.06.2015
I % (2014/2013)
52,14
I.Non-current assets
II.Current assets
38.979
173.617
20.323
218.099
41.577
226.469
125,62
Total assets
212.596
238.422
268.046
112,15
31.12.2013
31.12.2014
30.06.2015
I % (2014/2013)
156.989
0
55.607
165.834
0
72.588
151.860
0
116.186
105,63
212.596
238.422
268.046
112,15
Liabilities and shareholders

equity
I.Shareholders equity
II. Long-term liabilities
III. Current liabilities
Total
130,54
Table 2.4.5.2. Simplified annual balance sheets for LMM home care
Assets
31.12.2014
30.06.2015
II.Current assets
0
62.813
2.408
76.677
Total assets
62.813
79.085
Liabilities and shareholders equity
31.12.2014
30.06.2015
50.877
0
11.936
66.223
0
12.862
Total
62.813
79.085
Table 2.4.5.3. Simplified annual balance sheets for Loxan Optics

Assets
31.12.2013
31.12.2014
30.06.2015
II.Current assets
1.511
9.509
23
1.256
7.723
1.151
12.452
I % (2014/2013)
83,12
81,22
Total assets

11.020
8.979
13.603
Liabilities and shareholders

equity
Total
31.12.2013
31.12.2014
30.06.2015
81,48
I % (2014/2013)
-20.781
0
31.801
-35.349
0
44.328
-37.390
0
50.993
170,10
11.020
8.979
13.603
81,48
139,39
The increase in current liabilities for LMM is explained by the increase in the permanent
hired staff. Loxan optics is registering a big decrease in shareholders equity as a result of the year
after year loss.
Structural rates for assets
Non-current assets are at very low levels therefore the structural rates of non-current assets
will not be presented as they do not give any important information on the companies analyzed.
Structural rates for current assets are presented below.
Table 2.4.5.4. Structural rates for assets at Loxan Magnus Medical
Code
Name
31.12.2013
31.12.2014
Rca
Current assets rate
80,53
90,78
a) Stocks rate, Rs
0,18
0,00
b) Receivables rate, Rcr
58,47
54,62
b) Liquidities rate, Rd
21,87
36,16
Table 2.4.5.5. Structural rates for assets at LMM Home Care
Code
Name
31.12.2014
Rca
Current assets rate
99,72
a) Stocks rate, Rs
0,12
0,00
99,59
Table 2.4.5.6. Structural rates for assets at Loxan Optics
Code
Name
31.12.2013
Rca
Current assets rate
86,29
a) Stocks rate, Rs
83,35
0,00
2,94
31.12.2014
86,01
84,61
0,00
1,40
30.06.2015
83,94
0,00
61,07
22,87
30.06.2015
96,29
0,00
15,17
81,12
30.06.2015
91,54
73,49
0,00
18,05
Conclusions:
- we can observe that the rates had only minor fluctuations which means the business policy did not
changed essentially.
- stocks rate is very high at Loxan optics (over 80%).
24

Liabilities and shareholders equity structural rates
The way liabilities and shareholders equity are modified shows the evolution in time of the
financing sources.
Table 2.4.5.7. Liabilities and shareholders equity structural rates at Loxan Magnus Medical
Code Name
31.12.2013 31.12.2014 30.06.2015 Recommendation
Rfs
Financial stability rate
73,84
69,55
56,65
Higher than 70%
Rgfa Global financial autonomy
73,84
69,55
56,65
At least 33%
rate
Rtd
Total debt rate
26,16
30,45
43,35
Maximum 70%
Rltd Long term debt ratio
0,00
0,00
0,00
Minimum 50%
Rstd
Short term debt ratio
26,16
30,45
43,35
Smaller than 30%
Table 2.4.5.8. Liabilities and shareholders equity structural rates at LMM Home Care
Code
Name
31.12.2014
30.06.2015
Recommendation
Rfs
81,00
83,74 Higher than 70%
Rgfa
Global financial autonomy rate
81,00
83,74 At least 33%
Rtd
Total debt ratio
19,00
16,26 Maximum 70%
Rltd
Long term debt ratio
0,00
0,00 Minimum 50%
Rstd
19,00
16,26 Smaller than 30%
Table 2.4.5.9. Liabilities and shareholders equity structural rates at Loxan Optics
Code Name
31.12.2013 31.12.2014
30.06.2015 Recommendation
Rfs
Rgfa
Rtd
Rltd
Rstd

Global financial
autonomy rate
Total debt rate
Long term debt ratio
-188,58
-188,58
-393,69
-393,69
-274,87
-274,87
Higher than 70%

At least 33%
0
288,58
0,00
0
493,69
0,00
0
374,87
0,00
Maximum 70%
Minimum 50%
Smaller than 30%
Financial stability rate above 70% shows that permanent sources with short-term obligations
(non-interest bearing) are sufficient to finance current activities. Only LMM Home Care has the
financial stability rate well over 70%. LMM has this ratio at around 70%, the situation must be
controlled. Loxan Optics is in critical situation.
Global financial autonomy rate highlights the share of the company's own sources which
take part in assets financing. The literature recommends a value to ensure normality, as was shown
at over 33% (1/3 of total liabilities). In the case of Loxan Optics, global autonomy rate is well
below the minimum safe threshold.
25

The rate of short-term debt reflects the debt ratio which is outstanding in one year from total
financing sources. A comparison between the rate of current assets and short-term debt ratio is
suggestive because it provides information about short-term financial equilibrium. From
calculations, it appears that short-term debt ratio is below 30% at LMM Home Care and around that
level for LMM.
2.4.6. Risk analysis

Break-even point analysis
Break-even analysis is a method to determine the point at which revenue received or total
income equals the expenses associated with the activity that generates the revenue. Break-even
analysis calculates what is known as the margin of safety, the amount that income exceeds the
break-even point. It shows how much revenues can decline for the company to register profit or
break-even.
Also financial risk increases with indebtedness of a company and the volume of activity has
to expand proportionately with the size of loans attracted. So that an enterprise should cover in
addition to operating expenses all interest expenses.
The formula for the break-even point in this case is the following :
BEp= (Ef+Int)/(1- Ev/TO) where
BEp break-even point ; Ef fixed expenses; Int interest; Ev variable expenses ; TO turnover.
There are no long term interest bearer debts, therefore Int=0.
Salaries paid, expenses with the office (rent, electricity etc.) and amortization are considered
fixed expenses. All other expenses are considered variable.
Table 2.4.6.1 Breakeven point for Loxan Magnus Medical
Breakeven point analysis
31.12.2013
lei
1. Turnover
486.589
2. Total expenses
3. Fixed expenses
4. Variable expenses
Break-even point
TO/BEp
31.12.2014
lei
497.403
30.06.2015
lei
251.094
416.956
191.591
225.365
350.311
1,42
218.928
118.973
99.955
197.655
1,27
438.643
215.406
223.237
398.000
1,22
Table 2.4.6.2 Breakeven point for LMM Home Care

31.12.2014
lei
1. Turnover
110.070
2. Total expenses
3. Fixed expenses
56.093
46.956
26
30.06.2015
lei
122.830
78.801
59.004

9.137
Break-even point
51.207
TO/BEp
2,15
Table 2.4.6.3 Breakeven point for Loxan Optics

31.12.2013
lei
1. Turnover
23.410
2. Total expenses
3. Fixed expenses
Break-even point
TO/Bep
38.660
16.599
22.061
288.052
0,08
19.797
70.341
1,75
31.12.2014
lei
30.06.2015
lei
11.009
25.247
16.339
8.908
85.614
0,13
11.583
13.277
6.876
6.401
15.369
0,75
Looking at the turnover break-even point ratio we can see if the business policies changed
or if the change the occurred has modified the amount of fixed versus variable costs. While for
LMM and LMM home care things have not changed in the analyzed period, Loxan optics shows an
improvement in the area of fixed versus variable expense. This means that the business policy for
Loxan optics is improving and the company might be stabilized over the break-even point by the
end of 2015 or in 2016.
Bankruptcy risk analysis
Knowledge of economic and financial independence, timely detection of the different causes
that can generate unwanted changes in the company's activity, requires synthetic bankruptcy risk
assessment. To predict accurately the risk of bankruptcy Anghel method was used.
On the basis of the financial year 2013, 2014, and the first 6 months of 2015 determination
by this method scores led to these results:
Table 2.4.6.4 Bankruptcy risk at Loxan Magnus Medical
31.12.2013 31.12.2014 30.06.2015
Net profit
38.586
64.845
25.871
Total revenues
486.817
497.408
251.096
Cash-flow
46.500
86.220
61.303
Total assets
212.596
238.422
268.046
Liabilities
55.607
72.588
116.186
Short term liabilities
55.607
72.588
116.186
Turnover
486.589
497.403
251.094
A= 5,676+6,3718X1+5,3932X2-5,1427X3-0,0105X4
where Xi represents different financial variables:
X1= Net profit/Total revenues
0,079
0,130
0,103
X2= Cash-flow/Total assets
0,219
0,362
0,229
27

X3= Liabilities/Total assets
0,262
0,304
X4= (Short-term liabilities/Turnover)*365
41,712
53,266
A
5,578
6,332
0,433
168,892
3,563
Table 2.4.6.5 Bankruptcy risk at LMM Home Care

31.12.2014
Net profit
50.677
Total revenues
110.073
Cash-flow
62.557
Total assets
62.813
Liabilities
11.936
11.936
Turnover
110.070
A= 5,676+6,3718X1+5,3932X2-5,1427X3-0,0105X4
0,460
0,996
0,190
39,581
A
12,588
30.06.2015
40.346
122.831
64.150
79.085
12.862
12.862
122.830
0,328
0,811
0,163
38,221
10,906
Table 2.4.6.6 Bankruptcy risk at Loxan Optics

31.12.2013 31.12.2014 30.06.2015
Net profit
-15.712
-14.568
-2.042
Total revenues
23.537
11.009
11.583
Cash-flow
324
126
2.455
Total assets
11.020
8.979
13.603
Liabilities
31.801
44.328
50.993
31.801
44.328
50.993
Turnover
23.410
11.009
11.583
A= 5,676+6,3718X1+5,3932X2-5,1427X3-0,0105X4
-0,668
-1,323
-0,176
0,029
0,014
0,180
2,886
4,937
3,749
495,829
1.469,681
1.606,876
A
-18,466
-43,500
-30,625
Score Z
A < 0 bankruptcy/failure
0 < A < 2,05 uncertainty
A > 2,05 non-bankruptcy
28

Bankruptcy risk analysis shows the fact that Loxan Magnus Medical and LMM Home Care are
positioned in the non-bankruptcy area A > 2,05, and Loxan Optics is clearly at bankruptcy area with
A < 0.
2.4.7. Strengths and weaknesses from financial point of view

The activity of Loxan Magnus Medical and LMM Home Care in analyzed years ended with
positive net profit and the activity of Loxan Optics analyzed ended with a negative net profit
A pozitive net profit margin is a measure of the efficiency of the company (the higher the
rate the better) and a negative net profit margin means that the company is unprofitable.
ROTA is positive and over 10% (all big players on the market have under 10% ROTA) for
LMM and LMM home care but decreased in time for both companies which might mean that some
activities recently implemented are not yet at their optimum values. ROTA is negative for Loxan
Optics.
The multiplication factor of shareholders equity is quite high and this translates into a high
rentability of shareholders equity. The net rentability of total revenue is increasing slowly for LMM
(still being 2 folds bigger than the one registered by the big players on the same market) and for
LMM home care is decreasing (but still is at very high values).
The increase in current liabilities for LMM is explained by the increase in the permanent
hired staff.
Loxan optics is registering a big decrease in shareholders equity as a result of the year after
year loss.
The structural rates for assets had only minor fluctuations which means the business policy
did not changed essentially. The stock value is at very high level at Loxan optics (over 80%).
Financial stability rate above 70% shows that permanent sources with short-term obligations
(non-interest bearing) are sufficient to finance current activities. Only LMM Home Care has the
financial stability rate well over 70%. LMM has this ratio at around 70%, the situation must be
controlled. Loxan Optics is in critical situation.
Global financial autonomy rate highlights the share of the company's own sources which
take part in assets financing. The literature recommends a value to ensure normality, as was shown
at over 33% (1/3 of total liabilities). In the case of Loxan Optics, global autonomy rate is well
below the minimum safe threshold.
29

The rate of short-term debt reflects the debt ratio which is outstanding in one year from total
financing sources. A comparison between the rate of current assets and short-term debt ratio is
suggestive because it provides information about short-term financial equilibrium. From
calculations, it appears that short-term debt ratio is below 30% at LMM Home Care and around that
level for LMM.
Looking at the turnover break-even point ratio we can see if the business policies changed
or if the change the occurred has modified the amount of fixed versus variable costs. While for
LMM and LMM home care things have not changed in the analyzed period, Loxan optics shows an
improvement in the area of fixed versus variable expense. This means that the business policy for
Loxan optics is improving and the company might be stabilized over the break-even point by the
end of 2015 or in 2016.
Bankruptcy risk analysis shows the fact that Loxan Magnus Medical and LMM Home Care
are positioned in the non-bankruptcy area A > 2,05, and Loxan Optics is clearly at bankruptcy area
with A < 0.
2.5.
Diagnosis analysis conclusions
After a thorough analysis of the companies by means of the market they activates in, the
visibility they have on the market, the human resources they are using to generate added value and
make profit and the financial analysis made, we can summarize all that in one SWOT analysis for
all 3 companies taken as a group.
Strengths
Weaknesses
1. The group is performing better and better in 1. The group is a small player on the private
terms of turnover generated, profit and profit health care market
margin. The profit margin is much bigger (5 2. Loxan Optics is basically in bankruptcy.
times fold) than the one registered by the big 3. The offices are placed on streets where
players on the market.
pedestrians are rare and the visibility of the
2. The customers are from all areas available for companys logo poor.
this type of business: other private companies, 4. There is no marketing department and no real
the state and the paying people.
marketing strategy
3. The customer base is growing year by year 5. Management is not able to pull the plug on
(because the company is, basically, not losing unsuccessful projects.
any customers) which shows that the company 6. Very high fluctuation of employees.
provides high quality medical services.
7. Not using any type credit

30

4. The group has no long term liabilities and the
necessary working capital is generated by the
current activities.
Opportunities
Threats
1. The National Health System is not attractive 1.Excesive birocracy

to young or old professionals which mean there 2.Peoples resistance to change
is a pool of potential employees to choose from.
3.Legislation instability.
2. People are increasingly willing to pay more in 4.High demand for medical personal in UE
order to get high quality medical services which countries (much higher salaries).
will result in an increase of the private medical 5.Legislation
services market.
can
make
certain
activities
prohibitive for most of companies.
3. The partnership between the National Health

System and the private health care market were
people can get health care in private and the
state pays for it.
3. Expansion proposal
3.1. Investment plan
Idea
While reading a press release from 2013 made by MedNet, a marketing research center, that
is available on the internet, an idea for expansion began to take shape. The study MedNet made in
2013 had one very interesting question: What types of companies that offer health services
privately, you turned to last year? The private medical analysis laboratory was present in 4 out of
7 answers showing that 57.6% of the people interviewed from Bucharest had an interest in this type
of service. [7]
Figure 3.1.1. Mednets 2013 press release showing the interest of the population in the
types of private medical services
31
In this chapter I will calculate the necessary investment and draw the business plan for a
private medical analysis laboratory as a potential new type of business for Loxan Magnus Medical.
Services and clients
The medical analysis laboratory will provide medical test results for hematology, biology,
toxicology and parasitology to the following clients:
- medical analyses for patients from the activities of general practitioner, occupational health
services and specialty medical offices that are already a part of Loxan Magnus Medical;
- collaboration with other general practitioners from Bucharest (excluding the north which has many
specialty clinics) and from Ilfov county in order to harvest biological samples and perform medical
tests (according to existing legislation blood sampling can be done only by the company that owns
the medical analysis laboratory).
From the discussions with Loxan Magnus Medical I noted that the usual medical tests should
be performed at least once a year. For example they are requesting such tests for 700 patients/year
from the total of 1,400 active patients of general practitioner office. Those tests are paid by the
National Health System as part of the basic services package. In Bucharest alone there are almost
1.000 general practitioners registered and with contract with the National Health System. Another
factor taken into account to substantiate the market analysis is the framing settled by the National
House of Health for the charges for each analysis. Below is shown the standard package of medical
32

tests reimbursed by CNAS (National House of Health) which have a total value of 151 RON/set.
[11]
Table 3.1.2. Basic package to be considered and the price paid by CNAS
No.
Type of test
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Value paid by CNAS,

RON
Complete blood counts

Glycaemia
Total cholesterol
LDL - Cholesterol
HDL - Cholesterol
Triglycerides
Urea
Creatinine
Uric acid
TGO
TGP
Ionic Ca
Sideremia (Fe serum)
Magnesium serum
Ionogram (Na+;K+;Cl-)
ESR
Fibrinogen
Brief urine examination
TOTAL
14.01
5.74
5.74
7.69
8.19
7.04
5.86
5.92
5.86
5.86
5.83
7.88
7.10
5.37
21.00
2.63
13.68
15.29
150.69
An important element in the analysis is to determine the target population. The current social
situation of patients is caused by poor delivery of social health services by the state. At this time of
growing emphasis is on prevention in the health system and on the increasing role of the general
practitioners.
Location and necessary investment
The investment can be made at the company's headquarters.
Obtaining the necessary permits is closely related to the specific arrangements of a medical
analysis laboratory, in compliance with Order no.119 of 9 February 2004 of the Ministry of Health
for the approval of the Norms regarding the authorization and functioning of laboratories carrying
out medical analysis.[10]
Minimum size and no. of rooms, according to the legislation are presented in the following
table:
Table 3.1.3. Minimum rooms and surface for a medical analysis laboratory
33
Name

No. of rooms
2
Minimum
room surface,
sqm
3
room and facilities must have hot and cold water.

Parasitology requires separate workspace
Personal locker and bathroom (with washbasin and WC)
SPATII ANEXE
Storage space for sanitary materials, sterile and non-sterile
1
1
1
16
8
4
Infectious waste storage until their neutralization and/or evacuation

Minimum area required for laboratory
2
32
1
Laboratory spaces:
Hematology, biochemistry and toxicology can coexist in the same
Building a laboratory must apply the principle of no return plan: laboratory work must be in
a unidirectional flow and the work with patients must be completely separated from the laboratory
work (both are possible in space existing in the headquarters).
The minimum investment in equipment in order to provide the proposed services is
presented in the table below. The amortization of the equipment will be calculated for 5 years.
Table 3.1.4. Necessary equipment for the laboratory

No.
Name of the equipment
0
1
A. Hematology and biochemistry
1 Binocular microscope
2 Centrifuge
3 Thermostated water bath
4 Thermostat
5 Installation for water purification
6 Refrigerator and freezer
7 Biochemistry Analyzer
8 Automated Hematology Analyzer
9 Electrophoresis line in agarose gel or cellulose acetate
10 Coagulation Analyzer
11 Automated ESR Analyzer
12 Chemiluminescence Analyzer
13 Timer and automated pipettes
14 Fluorescence microscope
15 ELISA reader
16 Vortex mechanical shaker
17 Analytical balance
18 Magnetic stirrer with heating
19 Special furniture pieces
34
Total price, euro

2
800
1.575
300
300
900
5.100
10.460
10.800
4.000
6.800
1.810
6.500
600
2.520
2.400
800
3.180
760
5.000

20
IT equipment and software

B. Parasitology and Toxicology
1 Centrifuge
2 Complete ELISA line and Chemiluminescence Analyzer
3 Optical microscope
4 Installation for water purification
5 Special furniture pieces
TOTAL LABORATORY
11.800
1.575
6.500
3.620
900
2.000
91.000
The general cost estimate of the investment Laboratory of medical analysis is amounting to
a total of 111.000 Euro, the equivalent in lei being 489.000 lei, at an exchange rate of 4.4145 lei/
(from 09.10.2015).
The cost estimate is presented by chapters in the following table.
Table 3.1.5. General cost estimate of the investment
No.
Chapters and subchapters title by type of expenses
Value(excluding VAT)
EURO
LEI
Chapter 1
Expenses for permits
1.1 Obtaining approvals, agreements and authorizations
Subtotal cap. 1
Chapter 2
Expenses for the basic investment
2.1 Decorations and instalations
2.2. Equipment
Subtotal cap. 2
Chapter 3
Other expenses
3.1 Marketing and unpredicted Expenses
Subtotal cap. 3
Grand total
2.000
2.000
8.830
8.830
15.000
91.000
106.000
66.220
401.720
467.940
3.000
3.000
111.000
12.230
12.230
489.000
Minimum operating expenses

Expenses are:
- consumables for analysis (reagents) are considered as being 20% form the operating income. On
the romedic website Biometric Technology offers hematology reactives priced at 0.33 Euro/set.[1]
Taking into account that the price paid by the National Health System (the lowest price on the
market) for such a test is 3.17 Euro/set which means the reactives are at 10% from the lowest price
on the market. However 15% should cover also the losses with reagents registered in such a
business.
- marketing expenses 5% of the operating income.
35

- other expenses with consumables and travel (gas, car repairs) are set 2.5% of the operating income
- expenses with utilities and rent are set at 1% of the operating income.
- expenses with staff employed. The number of employees for the laboratory is two biologists paid
with 4,000 lei/month gross and two nurses paid with 2,000 lei/month gross.
Gantt chart
The Gantt chart of the investment is made based on the following assumptions:
1.The idea must be marketed to all the potential customers through all available channels for at least
half a year
2.The setting up of the laboratory (decorations and installations), the equipment acquisition and
installation, will take at least 2 months.
3.One biologist must be hired in order to receive all approvals and permits.
4.It takes about 6 months to receive all the permits and approvals
Figure 3.1.6. Gantt chart of the investment
In order to assess the profitability of the investment I will consider a pessimist approach, a
moderate-optimist approach and I will perform a risk analysis.
36
3.2. Pessimist approach

The general cost estimate of the investment Laboratory of medical analysis is 489,000 lei as
presented in Table 3.1.3 In order to make the investment a bank loan will be in lei will be
considered for the entire amount including VAT under normal conditions offered by the banks in
Romania. From the considerations above will result a bank loan of 606,360 lei.
Table 3.2.1. Financing conditions for the investment pessimist approach
Loan amount
606.360
Currency: lei
lei
The annual interest rate (%)
10
Period of the loan (months)
60
Year 1 - Year 5
Period without payments (months)
12
Year 1
Calculated refund rate
12.633
Lei/month
Calculated interest rate year 1
60.636
Lei
53.688
Lei
38.529
Lei
23.371
Lei
8.211
Lei
Total calculated interest
184.435
Lei
For revenue calculation I made the following assumptions:
- we consider the general practitioner office of Loxan Magnus Medical to be a young, small to
medium size office.
- from the total portfolio of 1,400 active patients we consider that the standard package of test is
required for 700 patients (the figure was extracted from the discussions with the management based
on actual figures)
- we consider that from the total number of 1,000 general practitioners registered in Bucharest and
Ilfov County the company will be able to sign contracts with 5 other general practitioner offices.
That amounts for 0.5% of the total market available. The management stated that they already have
37

very good contacts with 3 other general practitioner offices at this time providing them with some
services and it will be no problem to get 2 more contracts.
The total portfolio of clients will consist of 1,400 patients*6 = 8,400 patients. This means that a
total of 4,200 standard packages of 151 Ron/set will be the revenues expected in this approach
The second year of the investment (first year in operation) will take into consideration only 75% of
the operating incomes forecasted.
Table 3.2.2. Income forecast of the investment pessimist approach

Year1 Year 2 Year 3 Year 4 Year 5
No.
Category
RON
UM
Physical sales forecast
1 Medical analysis services pack.
151 piece
3.150 4.200 4.200
4.200
Sales values forecast
151 RON
475.650 634.200 634.200 634.200
Total Income
RON
475.650 634.200 634.200 634.200
Expenses forecast will be based on the assumptions made in chapter 3.1.

Table 3.2.3. Expenses forecast of the investment pessimist approach
Year1 Year 2 Year 3 Year 4
No.
Category
Year 5
UM
1 Expenses with reagents and

marketing
2 Expenses with consumables and
travel
3 Expenses with rent and utilities
4 Material expenses total
RON
0 95.130 126.840 126.840 126.840
RON
RON
RON
0 4.757
6.342
6.342
6.342
0 111.778 149.037 149.037 149.037
5 Expenses with hired staff

6 Expenses with insurance and social
protection
7 Expenses with hired staff total
RON
RON
24.000 120.000 144.000 144.000 144.000

6.240 31.200 37.440 37.440 37.440
RON
30.240 151.200 181.440 181.440 181.440
8 Amortization expenses
9 Operating expenses - total
RON
RON
73.350 97.800 97.800 97.800

30.240 336.328 428.277 428.277 428.277
No.
1
2
11.891
15.855
15.855
Table 3.2.4. Profit and loss account projection the pessimist approach
Total
Total
Total
Total
Year 1
Year 2
Year 3
Year 4
Category
Operating income
Operating turnover
Operating income total
Operating expenses
RON
RON
0
0
38
475.650
475.650
634.200
634.200
634.200
634.200
15.855
Total
Year 5
634.200
634.200
3
4
5
6
7
8
9
10
11
12
13
I.
A.
B.
C.
D.
II.
E.
H.
I.
I1.
I2.
I3.
I5.
I6.
J.
K.
O.

Material expenses total
RON
0 111.778 149.037 149.037
Hired staff expenses total RON
30.240 151.200 181.440 181.440
Expenses with amortization RON
0
73.350
97.800
97.800
Operating expenses- total
RON
30.240 336.328 428.277 428.277
Operating result
RON
-30.240 139.322 205.923 205.923
Financial income
RON
Expenses with interest
RON
60.636
53.688
38.529
23.371
Financial result
RON
-60.636 -53.688 -38.529 -23.371
Gross profit
RON
-90.876
85.634 167.394 182.552
Taxes
RON
-14.540
13.701
26.783
29.208
Net profit
RON
-76.336
71.933 140.611 153.344
The cash-flow for years 1 to 5 is presented below.
Table 3.2.4. Cash flow of the investment pessimist approach
Operations/Period
Year 1
Year 2
Year 3
Financing and investment activity
Total cash inflows from:
606.360
0
0
Medium and long term Loans
606.360
Total outflow of liquidities through
606.360
0
0
investment :
Acquisitions of tangible fixed assets,
606.360
including VAT
Total outflow of cash through
0 151.596 151.596
financing
Repayments of long and medium
0 151.596 151.596
term loans
Cash flow from investing activities
0 -151.596 -151.596
and financing (A-B-C)
Operating activity
Income from operating activities,
0 589.806 786.408
including VAT
Total cash inflows (E)
0 589.806 786.408
Payments for operating activities,
30.240 289.804 366.246
including VAT (if applicable), of
which:
Expenses with reagents and
0 117.961 157.282
marketing
Expenses with consumables and
0
14.745
19.660
travel
Expenses with rent and utilities
0
5.898
7.864
Expenses with hired staff
24.000 120.000 144.000
Expenses with insurance and social
6.240
31.200
37.440
protection
Gross cash flow before taxes and
-30.240 300.002 420.162
VAT adjustments (H-I)
Payments for taxes and
-131.900 101.031 143.222
VAT(K1+K2)
K1. VAT payments
-117.360
87.329 116.439
K2. Taxes on profit
-14.540
13.701
26.783
Total payments, excluding those
-131.900 101.031 143.222
39
Year 4
149.037
181.440
97.800
428.277
205.923
8.211
-8.211
197.712
31.634
166.078
Year 5
0
151.596
151.572
151.596
151.572
-151.596
-151.572
786.408
786.408
786.408
366.246
786.408
366.246
157.282
157.282
19.660
19.660
7.864
144.000
37.440
7.864
144.000
37.440
420.162
420.162
145.647
148.073
116.439
29.208
145.647
116.439
31.634
148.073

related to operations(K)
P. Cash flow from operating activities
101.660 198.971 276.940 274.515
(J-O)
III. CASH FLOW
Q. Net cash flow for the period (D+P)
101.660
47.375 125.344 122.919
R. Available cash from previous period
0 101.660 149.035 274.379
S. Available cash at the end of the
101.660 149.035 274.379 397.298
period(Q+R)
272.089
120.517
397.298
517.815
The financial rates calculated based on these estimates are presented below.
Table 3.2.5. Financial rates for the investment the pessimist approach
Year
No.
1
Unit
Year 1
Year 2
Year 3
Year 4
Year 5
Financial indicator
Investment value(Iv)
RON
Operating income (OI)
RON
475.650
634.200
634.200
634.200
Operating expenses (OE)
RON
30.240
336.328
428.277
428.277
428.277
Operating margin (OM)
29,29%
32,47%
32,47%
32,47%
Investment recovery time
Years
Return on invested capital

%
(ROIC)
The rate of coverage through
Numerica
cash flow
l
Indebtedness rate on medium
%
and long term
Cash available at the end of the
RON
period
7
8
9
Value
489.000
4,2809
20,79%
101.660
40,69%
56,63%
56,14%
55,64%
1,9790
2,7716
2,7716
2,7720
26,85%
25,60%
24,56%
23,68%
149.035
274.379
397.298
517.815
Investment value= total value of the project without VAT

In order to be profitable the investment should fulfill the following conditions:
1.Investment recovery time smaller than the amortization period of the equipment which is
5 years
2.Return on invested capital (ROIC) higher than 10% (average of the healthcare services
EU market Damodaran data)
3.The rate of coverage through cash flow must be higher or equal to 1.3
4.Indebtedness rate on medium and long term - maximum 60%
5.Cash available at the end of the period must be positive
From the values obtained we can see that the investment is profitable.
40
3.3. Moderate/optimist approach

The general cost estimate of the investment Laboratory of medical analysis is 489,000 lei as
presented in Table 3.1.3
To that cost estimate we will add the costs generated by the purchase of two cars needed to
go to general practitioners to harvest biological samples for the patients in their portfolio.
Table 3.3.1. Car costs
Name of the car
No
1
2
Unit
Dacia Logan MCV

Dacia Logan MCV
Total cars
Quantity
piece
piece
Total price,
euro
1
6.500
1
6.500
13.000
Total value of the investment will be 124.000 Euro, lei equivalent being 547.400 lei.
Table 3.3.2. General cost estimate of the investment moderate/optimist approach
No.
Chapters and subchapters title by type of expenses
Value (excluding VAT)
EURO
LEI
Chapter 1
Expenses for permits
1.1 Obtaining approvals, agreements and authorizations
Subtotal cap. 1
Chapter 2
Expenses for the basic investment
2.1 Decorations and instalations
2.2. Equipment
Subtotal cap. 2
Chapter 3
Other expenses
3.1 Marketing and unpredicted Expenses
41
2.000
2.000
8.830
8.830
15.000
104.000
119.000
66.220
459.110
525.330
3.000
13.240

Subtotal cap. 3
3.000
Grand total
124.000
13.240
547.400
In order to make the investment a bank loan will be in lei will be considered for the entire
amount including VAT under normal conditions offered by the banks in Romania. From the
considerations above will result a bank loan of 678,776 lei.
Table 3.3.3. Financing conditions for the investment moderate/optimist approach

Loan amount
678.776
Currency: lei
lei
The annual interest rate (%)
10
Period of the loan (months)
60
Year 1 - Year 5
Period without payments (months)
12
Year 1
Calculated refund rate
14.141
Lei/month
67.872
Lei
60.100
Lei
43.131
Lei
26.161
Lei
9.192
Lei
Total calculated interest
206.456
Lei
For revenue calculation I made the following assumptions:
- from the current customer portfolio of occupational health services of 2,500 we consider that 10%
of the total will require at least the standard package of tests once a year
- we consider the general practitioner office of Loxan Magnus Medical to be a young, small to
medium size office.
- from the total portfolio of 1,400 active patients we consider that the standard package of test is
required for 700 patients (the figure was extracted from the discussions with the management based
on actual figures)
- we consider that from the total number of 1,000 general practitioners registered in Bucharest and
Ilfov County the company will be able to sign contracts with 10 other general practitioner offices.
That amounts for 1% of the total market available.
The total portfolio of clients from general practitioner market will consist of 1,400 patients*11 =
15,400 patients.
This means that a total of 7,700 + 250 standard packages of 151 Ron/set will be the revenues
expected in this approach .
The second year of the investment (first year in operation) will take into consideration only 75% of
the operating incomes forecasted.
42

Operating expenses will be set the same way described for the pessimist approach as
percentage from the operating income.
Table 3.3.4. Operating income forecast for the investment moderate/optimist approach
Year1 Year 2 Year 3
Year 4
Year 5
No. Category
RON UM
Physiscal sales forecast
151 Buc
5.963
7.950
7.950
7.950
Sales value forecast
151 RON
900.338 1.200.450 1.200.450 1.200.450
Total operating income
RON
900.338 1.200.450 1.200.450 1.200.450
Table 3.3.5. Expenses forecast of the investment moderate/optimist aproach
Year1
Year 2 Year 3 Year 4 Year 5
No. Category
UM
1 Expenses with reagents and

marketing
2 Expenses with consumables and
travel
3 Expenses with rent and utilities
RON
0 180.068 240.090 240.090 240.090
RON
0 22.508
RON
RON
0 9.003 12.005 12.005 12.005

0 211.579 282.106 282.106 282.106
5 Expenses with hired staff

6 Expenses with insurance and social
protection
7 Expenses with hired staff total
RON
RON
24.000 84.000 144.000 144.000 144.000

6.240 21.840 37.440 37.440 37.440
RON
30.240 105.840 181.440 181.440 181.440
8 Amortization expenses
RON
RON
82.110 109.480 109.480 109.480

30.240 399.529 573.026 573.026 573.026
No.
30.011
30.011
Table 3.3.6. Profit and loss account projection moderate/optimist approach

Year 1
Year 2
Year 3
Year 4
Category
Operating income
1 Operating turnover
2 Operating income total
Operating expenses
4 Hired staff expenses total
5 Expenses with amortization
7 Operating result
8 Venituri financiare total
9 Expenses with interest
10 Financial result
11 Gross profit
12 Taxes
30.011
Year 5
RON
RON
0
0
RON
RON
RON
RON
RON
RON
RON
RON
RON
RON
0
30.240
0
30.240
-30.240
211.579
105.840
82.110
399.529
500.808
282.106
181.440
109.480
573.026
627.424
282.106
181.440
109.480
573.026
627.424
282.106
181.440
109.480
573.026
627.424
67.872
-67.872
-98.112
-15.698
60.100
-60.100
440.708
70.513
43.131
-43.131
584.293
93.487
26.161
-26.161
601.263
96.202
9.192
-9.192
618.232
98.917
43
900.338 1.200.450 1.200.450 1.200.450

900.338 1.200.450 1.200.450 1.200.450
13 Net profit

RON
-82.414 370.195 490.806 505.061
Table 3.3.7. Cash flow of the investment moderate/optimist approach

Operations/Period
Year 1
Year 2
Year 3
Year 4
I. Financing and investment activity
A. Total cash inflows from:
678.776
0
0
0
Medium and long term Loans
678.776
B. Total outflow of liquidities through
678.776
0
0
0
investment :
Acquisitions of tangible fixed assets,
678.776
including VAT
C. Total outflow of cash through
0 136.848 136.848 136.848
financing
Repayments of long and medium
0 136.848 136.848 136.848
term loans
D. Cash flow from investing activities
0 -136.848 -136.848 -136.848
and financing (A-B-C)
II. Operating activity
E. Income from operating activities,
0 1.116.419 1.488.558 1.488.558
including VAT
H. Total cash inflows (E)
0 1.116.419 1.488.558 1.488.558
I. Payments for operating activities,
30.240 368.198 531.251 531.251
including VAT (if applicable), of
which:
I1. Expenses with reagents and
0 223.284 297.712 297.712
marketing
I2. Expenses with consumables and
0
27.910
37.214
37.214
travel
I3. Expenses with rent and utilities
0
11.164
14.886
14.886
I5. Expenses with hired staff
24.000
84.000 144.000 144.000
I6. Expenses with insurance and social
6.240
21.840
37.440
37.440
protection
J. Gross cash flow before taxes and
-30.240 748.220 957.307 957.307
VAT adjustments (H-I)
K. Payments for taxes and
-147.074 235.815 313.890 316.605
VAT(K1+K2)
K1. VAT payments
-131.376 165.302 220.403 220.403
K2. Taxes on profit
-15.698
70.513
93.487
96.202
O. Total payments, excluding those
-147.074 235.815 313.890 316.605
related to operations(K)
P. Cash flow from operating activities
116.834 512.405 643.417 640.702
(J-O)
III. CASH FLOW
Q. Net cash flow for the period (D+P)
116.834 375.557 506.569 503.854
R. Available cash from previous period
0 116.834 492.391 998.960
S. Available cash at the end of the
116.834 492.391 998.960 1.502.814
period(Q+R)
44
519.315
Year 5
0
0
136.856
136.856
-136.856
1.488.558
1.488.558
531.251
297.712
37.214
14.886
144.000
37.440
957.307
319.320
220.403
98.917
319.320
637.987
501.131
1.502.814
2.003.945
The financial rates calculated based on these estimates are presented below.
Table 3.3.8. Financial rates for the investment the pessimist approach
Year
No.
1
Unit
Financial indicator
Investment value(Iv)
RON
Operating income (OI)
RON
Operating expenses (OE)
RON
Operating margin (OM)
Investment recovery time
years
Return on invested capital

%
(ROIC)
The rate of coverage through
Numerical
cash flow
Indebtedness rate on medium
%
and long term
Cash available at the end of the
RON
period
7
8
9
Year 1
Year 2
Year 3
Year 4
Year 5
Value
547.400
30.240
900.338
1.200.450
1.200.450
1.200.450
399.529
573.026
573.026
573.026
55,62%
52,27%
52,27%
52,27%
1,7267
21,34%
116.834
93,61%
117,54%
117,04%
116,55%
5,4675
6,9954
6,9954
6,9950
17,72%
12,53%
9,70%
7,93%
492.391
998.960
1.502.814
2.003.945
1.Investment recovery time much smaller than the amortization period of the equipment
which is 5 years
2.Return on invested capital (ROIC) is much higher than 10% (average of the healthcare
services EU market Damodaran data)
3.The rate of coverage through cash flow must be higher or equal to 1.3
4.Indebtedness rate on medium and long term - maximum 60%
5.Cash available at the end of the period must be positive
From the values obtained we can see that the investment is very profitable based on this
scenario.
45
3.4. Risk assessment

A first step in the risk analysis of the investment projects is to identify the various potential
risk categories that can affect their viability. The risk assessment will be made based on the data
emerged from the pessimist scenario.
The strategic risk consists in diminishing the companys market share and leading to
financial losses. Measuring the impact of this risk class is done by determining the variation of the
market share owed mainly to the change in the demand of products specific to the company. In this
case the market share that is aimed is very low therefore impact of this risk category is very small.
In case the relationships with clients and suppliers wont materialize at the level foreseen in
the contracts, a commercial risk could occur. It will be felt by losing some clients, which means
the estimated production will not be completely turned into account, incomings wont cover costs
and therefore the earnings will drop. At the same time, the commercial risk could lead to unfulfilled
relationships with suppliers, which means the cost will be inflated with sums derived from
preparing the supply, namely commercial meetings, preliminary studies, drawing up the supply for
products, which also lowers the financial results of the project. This risk should be analyzed.
The legal risk comes from failing to comply with the legislation in effect, because of
potential changes, norms and regulations. The consequences of the legal risk occurrence in this case
would mean closing the business. However the risk is minimum because Romania is part of the EU
and his legislation should be in compliance with EU regulations so the rules of the game can not
change drastically in the analyzed time period.
The financial risk means the possibility to record additional financial expenses
(unfavorable exchange rate), which will lead to diminishing incomes or even financial losses. This
risk is small because the only exchange rate dependency is to reagents used which amount for 15%
of total operating income. A 10% increase in exchange rate (which is highly unlikely) will result in
an increase of the reagents to 16.6% of the total income. This might lower the profit by a small
margin but will not drive the business into loss.
The operational risk is related to changing conditions that affect the operating activity of
the investment objective. Known also as economic risk or operating risk, the operational risk
impacts the production costs statement and the profitability level of the project. The rise of the costs
of raw materials, fuels, energy, work force or other resources over the initial estimations means an
increase of the total efforts and an adequate drop in the earning in comparison to the expected level.
This risk should be calculated.
The maintenance and service risk is related to exceeding the costs established in
accordance with inaccurate estimations of the repairs expenses, to unforeseen malfunctions of the
46

equipment. Taking into account that the equipment is new and comes with a 3 years warranty I
estimate this risk to be very low.
In order to assess the risks associated with the proposed investment project I will use the
sensitivity analysis, because its a largely used method for the economic-financial analysis of
investment projects. It gives the possibility to identify the critical variables of a project, and can be
used to measure the project risk in order to justify decisions. [2]
The sensitivity analysis used to measure the risk takes into consideration the identification of the
factors that have the biggest influence over the net present value and the quantification of these
influences.
The formula that is used is the following:
where:
NPV represents the net present value project;
I - the cost of the total investment = 489,000
q is the quantity of products commercialized in one year = 4,200
p - product price = 151
Ef - unit expenses with the labor force = 43.2
Em - unit expenses materials and amortization = 58.8
i- the risk-free rate = 2%
rp risk premium =2%
The formula below represents the cumulated discount factor adjusted to risk:
This is also called annuity factor for a period of n years and a discount rate a (where a = i+rp).
The annuity factor is noted with Aan . The formula becomes:
Considering the risk free rate at 2% and the risk premium at 2% the annuity factor for the
investment project analyzed is 4.452.
In order to measure the level of an influence factor that could impact the outcome of the
investment, the size of the net present value, is considered to be 0.
The critical level of sales is calculated with:
47
qcr = 489,000/ [(151-102)*4.452] = 2,242

The critical level of the unit price is calculated with:
pcr = 102+489,000/(4,200*4.452) = 128.15

The critical level of the labor force cost/product is:
Efcr = 151-58.8-489,000/(4,200*4.452) = 66
The critical level of the material and amortization expenses/product is:
Emcr = 151-48.8 - 489,000/(4,200*4.452) = 81.6

Assessing the sensitivity of the influence factors is based on the relative deviations of the
critical values calculated towards the forecasted values.
Fcr is the critical value of the influence factor for which the NPV is 0 and F the value of the factor from the
forecasted data.
Table 3.4.1. Financial indicators pessimist scenario

Forecasted
levels
Annual sale volume
Unit price
Unit cost for labor
Unit cost for materials and amortization
critical
levels
4200
151
43.2
58.8
Relative
deviation
2242
128
66
81.6
-46.62
-15.23
52.78
38.78
The factors which have a low variation (positive or negative) are the more risky elements for
the investment project.
48

The data obtained shows that unit price is the main risk for the investment project. But the
unit price is at the lowest possible value and it should increase next year. Only a catastrophic event
(war, economic crisis, default of the state ) could lower the unit price by 15%.
The unit costs for materials and amortization is at 39%. An increase in the prices of the
materials with 30 % is highly unlikely to occur in next five year period. The relative deviation is at
safe values.
All other indicators are at safe values.
Break-even point for the investment
The formula for the break-even point in this case is the following :
BEp= (Ef+Int)/(1- Ev/TO) where
BEp break-even point ; Ef fixed expenses; Int interest; Ev variable expenses ; TO turnover.
Interest will be considered at highest calculated value
for year 1 of the investment
Int=60,636 lei.
Salaries paid, expenses with the office (rent, electricity etc.) and amortization are considered
fixed expenses. Fixed expenses totalize 317,292 lei at year 3.
All other expenses are considered variable. Variable expenses value is 110,985 lei at third
year.
The turnover in the 3rd year is 634,200 lei
Table 3.4.2 Break-even point for the investment pessimist scenario
1. Turnover, lei
2. Total expenses, lei
3. Fixed expenses, lei
4. Variable expenses, lei
5. Highest interest registered (year
1)
Break-even point, lei
TO/BEp
Year 3
634,200
428,277
317,292
110,985
60,636
311,791
2.03
The break-even point analysis shows that we have a very safe investment scenario.
49
4. Recommendations
Following the conclusions we draw from the diagnosis analysis of the group of companies
and from the investment project analysis there a number of recommendations that should be made
in order to improve the performances of the companies.
1. Loxan Optics should be either introduced in bankruptcy or, if the management considers
that the activity of the company is important from status point of view, that is not wanted, here are a
few steps in order to make the company profitable:
a) The operating expenses lowered even more. This can be done by leaving only a part time
employee (2 Hours/day) on the company and making a partnership with Loxan Magnus Medical
that will provide workforce when needed. This should lower the expenses by half and potentially
make Loxan Optics profitable.
b) In order to increase the turnover of Loxan Optics an office with good visibility should be
chosen in order to attract new customers. This will involve an investment in new offices and should
only be considered at a later stage because the risk involved with such investment is high taking into
account the current state of the business
c) The prices are very low compared to what is available on the market (they operate with
10-15% commercial margin) and should be increased by at least 15%. This way the turnover will
increase and they will still be one the cheapest on the market.
2. LMM home care is performing very well and the current state of business should be
maintained. However the management should keep an eye on the investments (no investments made
in this company apart from HR) and help the workforce with the necessary investments when time
comes (cars, equipment)
3. Loxan Magnus Medical, is the main workhorse of the group, the one that is registering
most of the expenses and the one that is making the highest turnover.
a) First recommendation has to do with the absence of a sound marketing strategy
(networking has already reached its limits) and of a dedicated marketing department. The company
should either invest in the creation of an internal marketing department or should start collaboration
with a dedicated marketing company. This should be done with the aim to provide the Loxan
Magnus Medical management with the necessary strategy that will increase the awareness and the
visibility on the market of the company and of the services provided.
50

b) Human resources register a very high fluctuation over the years and personal retention is
poor. From the discussions with the management and from the diagnostic analysis I understood that
is impossible to increase salaries of employees. However a system of rewards based on key
performance indicators (new clients attracted, turnover generated, complaints registered, etc.)
should be set in order to motivate the existing workforce to improve their activities and to give them
the possibility to evolve in the company and to increase their paycheck.
c) The offices are located in areas with no visibility. The company should consider closing
one of the offices and moving the other one in another space better suited for the tasks performed.
An new headquarter, on a high visibility street, close to the main pool of clients for general
practitioner will bring benefits such as: potential new customers from the street; the main pool of
clients will have access to all other specialty medical offices they have and will increase the income
generated by that side of the business.
d) The increase in turnover although steady for the last 3 years is not satisfactory. In order to
increase the turnover 2-3 fold in a short period the proposed investment in a medical analysis
laboratory should be implemented.
51

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LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

2.1. Romanian health system

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

2.2. Private healthcare market - the clients

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

2.3. Private healthcare market the competitors.

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

Diagnosis analysis of LMM and its daughter

2.4.1. Brief overview of the analyzed companies

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

Employees with permanent

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

2.4.2. The human resources

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

Table 2.4.2.4 Human resources by work experience year 2015

Table 2.4.2.5 Human resources by current job seniority year 2015

Table 2.4.2.6 Human resources by age year 2015

Total nr of employees - from which:

Table 2.4.2.7 Indicators for highlighting labor movement

30-35 years >35 years

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

Figure 2.4.2.8. Current organizational chart

Table 2.4.2.9 Human resources SWOT analysis

attractive to young or old professionals

peoples resistance to change

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

2.4.3. Turnover and profit evolution

Net Profit/Loss , RON Net Profit Margin, %

Loxan Magnus Medical

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

2.4.4. Diagnosis analysis based on return rates

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

Table 2.4.4.2 Net profit at LMM HOME CARE

Table 2.4.4.3 Net profit at Loxan Optics

12. Net profit

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

Table 2.4.4.4 Profit margin at Loxan Magnus Medical

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

LMM home care

The formula is:

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

Table 2.4.4.14. Factorial analysis of ROE for Loxan Magnus Medical

Table 2.4.4.15. Factorial analysis of ROE for LMM Home Care

Using this model one can draw the following conclusions :

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

2.4.5. Patrimonial balance sheet and rates

Liabilities and shareholders

Liabilities and shareholders equity

Table 2.4.5.3. Simplified annual balance sheets for Loxan Optics

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

Liabilities and shareholders

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

Short term debt ratio

Smaller than 30%

Financial stability rate

Higher than 70%

LOXAN MAGNUS MEDICAL, THE GROUP CASE STUDY

2.4.6. Risk analysis