Introduction

SABIC (Saudi Basic Industries Corp.) was founded in 1976 and has developed

tremendously since then. The corporation is a global leader in the production of petrochemicals.

SABIC is a state-owned enterprise, however the Saudi government owns 70% of the corporation.

Private investors from the Gulf own 30% of the firm. Since then, it has expanded to over 50

countries and today employs over 40,000 people to support its global operations. SABIC's

business segments include "chemicals, plastics, agro-nutrients, metals, and specialized goods".

These many divisions concentrate on certain items such as "chemicals, metals, speciality,

agricultural fertilizers, and polyolefins, PET, PS, PVC, and technical thermoplastics" (Saudi

Basic Industries Corp., 2016).

The company's headquarters and headquarters are in Riyadh, while its main industrial

complexes are at "Al-Jubail in the Persian Gulf and Yanbu on the Red Sea" (Saudi Basic

Industries Corp., 2016). Saudi Arabian Basic Industries Corporation (SABIC) is the world's

second biggest diversified petrochemical corporation. SABIC consistently focuses on innovation,

sustainability, leadership commitment, and high value-added business chains. Forecasts for the

petrochemicals sector are encouraging, thanks to the Saudi government's commitment to growth,

rising demand, and investment in environmental control.

Question 1: Representing value through the Statement of Profit and Loss

Profit, by itself, is no longer a reliable indicator of a company's success today. It's an

insufficient metric that doesn't provide a comprehensive view of a company's health. Real impact

is the new yardstick for success. Profits alone, without regard for the good impact of company

operations, are out of date. The true measure of a company's success is its influence on human

and environmental well-being. The ultimate measure of achievement is happiness. The social and

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environmental consequences can no longer be ignored. The future business model is one that not

only seeks to maximize profits, but also has a good influence on people and the environment.

Companies must set the example by promoting an inclusive economy in which business plays an

important role in the promotion of the common good, the expansion of wealth, and the reduction

of inequality

Take a look at one of the International Accounting Standards (IAS 7: Statement of

Cash Flow).

The cash flow statement summarizes cash flows for the period by operating, investing,

and financing operations. An organization communicates its cash flows from operating,

investing, and financing activities in the most appropriate manner for its operations. The activity

classification gives information that allows users to examine the impact of various activities on

the organization's financial condition and the quantity of cash and cash equivalents. This data

may also be used to assess the interdependence of various activities. A single transaction can

have many categorized cash flows.

Operating cash flow assesses how successfully an organization's activities create enough

cash flow to pay down debt, maintain capacity, pay dividends, and make new investments

without relying on outside funding. It is an essential metric for determining if information about

certain components of previous operational cash flows, together with other data, may assist

anticipate future operating cash flows. The majority of operational cash flow is generated by

principal revenue-generating operations. As a result, they are frequently the result of trades and

other major occurrences.

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 However, the statement of cash flows prepared in line with international accounting

standards foretells the significance of the organization's activities and cash flows, including;

1. Confirm profitability and liquidity.

2. Examine the cash capital balance of the firm.

3. Concentrate on monetary management

4. Organizational planning and coordination and

5. More effective than accrual accounting

Despite considerable affluence and technical progress in today's economic environment,

globalization remains strong, resulting in complicated global concerns and severe societal

repercussions. Financial performance as the final measure of success can be problematic in both

public and nonprofit organizations (though possibly less so in for-profit companies). Instead of

creating a profit, executing on a budget and producing revenue might cause an organization to

become inattentive to the requirements of its customers. However, there has recently been

increased pressure to modify the way financial success is prioritized on the KPI priority list. ESG

(environmental, social, and governance) performance is a hot subject these days. And it has the

potential to offer greater overall and real-world balance to the measures that ultimately decide

organization performance across industries.

Question 2: Financial Performance (Ratios) of SABIC Company

The financial performance of a company is a measure of its operational success and

financial strength, and historical research of a specific industry demonstrates its growth and

contribution to the nation's economy. SABIC, a component of the Gross Domestic Product, plays

a significant role in the growth of the economy (GDP). Strong financial success in 2021, driven

by greater selling prices for our main items and a commitment to capital discipline. In Q4 2021,

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SABIC's EBITDA was SAR 13.05 billion ($3.48 billion), an increase of 17% quarter on quarter

and 95% year on year. This is mostly due to higher sales volumes and average product pricing.

Meanwhile, operations and maintenance income of SAR 8.63 billion ($2.30 billion) was 12%

higher than the previous year's SAR 7.70 billion ($2.05 billion), with operating income of SAR

3.79 billion ($1.01 billion) in the fourth quarter of 2021, an increase of 128% from the fourth

quarter of 2020. Profit was 12% lower at SAR 4.93 billion ($1.32 billion) in net profit. Last

quarter's net profit was SAR 5.59 billion ($1.49 billion), rising 119% from SAR 25 billion ($0.60

billion) in Q4 2020.

SABIC remains focused on maximizing the value of its joint synergies with Saudi

Aramco. SABIC realized a value of $ 468 million between the time Saudi Aramco purchased

70% of its shares and the end of 2021. This represents the company's goal of producing between

$1.5 billion and $1.8 billion in value by 2025. In addition, SABIC Agro-Nutrition Company was

created with the objective of being a national champion and global leader in the agro-nutrients

market. More effective corporate strategy, completely focused research and development

programs, sales and supply chain, and personnel acquisition and development are all areas of

concentration for the new organization.

Visual Representation of Financial Ratio of SABIC Petrochemical Company

This section utilizes appropriate financial ratios to assess the company's liquidity,

profitability, and solvency ratios for the period of 5year (2017-2021). The financial ration will be

done in SAR Billions.

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 1. Liquidity Ratios

Liquidity Rati o
4
3.71
3.5
3.3 3.2
2.98 2.91
3 2.83
2.88
2.7 2.6
2.65
2.5

1.5

0.5

0
Current Ratio Quick Ratio

2021 2020 2019 2018 2017

The current ratio for the last five years reveals that SABIC has improved significantly,

indicating that the company has been able to satisfy short-term and long term commitments

within a particular time frame. SABIC has likewise maintained a quick ratio of greater than the

current ration. As a result, SABIC is able to satisfy its long term and short-term obligations as

needed. Any ratio less than one is grounds for concern regarding a company's present assets and

capacity to fulfill its short-term liability.

However, SABIC Company enjoy a run of quick ratio and avoid been fall below the

current ratio, it implies that a company's current assets are substantially leveraged by inventories.

SABIC, on the other hand, is not in this category. The company's current asset to total asset ratio

is greater than 35%, suggesting that SABIC has a positive current asset base in terms of assets.

As a result, there is little chance of a liquidity crisis. Some of these ratios, however, are greater,

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indicating that SABIC is utilizing cash inefficiently in order to create more revenue. In fact, the

money might be virtually completely idle.

The Profitability

Profi tability and Working Capital

40

35

30

25

20

15

10

0
Inventory Day Net Profit Margin Asset Turnover Payable Day

2021 2020 2019 2018 2017

The company's inventory day is steady, ranging from 40% to 35%. SABIC still has a

rather decent ratio from 2017 to 2021, the net-profit margin increased from 17.9 to 15.80%.

After subtracting operating expenditures, expenses, taxes, and preferred stock dividends, SABIC

remained profitable, and this ratio demonstrates the company is highly excellent at converting

revenue into profit for investors.

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Performance and Efficiency Ratio

Performance and Effi cency

100

80

60

40

20

0
Return on Shareholder Asset Turnover Return on Capital (ROCE) Non Current Asset
Turnover

2021 2020 2019 2018 2017

From 2017 to 2021, SABIC Company maintained a high performance ratio. Companies

having a performance ratio greater than 20% are thought to be financially solid and capable of

meeting long-term obligations. When total equity is compared to total assets, the equity ratio

SABIC (leveraged investment) represents the proportion of assets funded by shareholders. This

proportion fell from 2017 while return on shareholder has been steady throughout the years.

SABIC's present excellent equity ratio demonstrates that the Government of Saudi which are

primary-shareholder and other reserved shareholders believed in the organization and are willing

to fund it at any moment need.

Question 3: Limitations to Organization Issues

SABIC's liquidity ratio is now favorable. However, the corporation is expected to keep

this ratio over one. A ratio less than one shows that the corporation cannot satisfy its short-term

debt commitments. Simultaneously, the liquidity ratio should not be too high. A greater ratio

shows that the organization is not utilizing cash effectively in order to produce more revenue.

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However, a significant downhill development has been recorded from 2011 to the present. This

demonstrates that SABIC earnings continues to fall in comparison to the prior year. To optimize

earnings, SABIC management must work on lowering operational expenses while growing sales.

Any strategic choice should be made with the goal of maximizing present or future earnings.

SABIC owns a rather high solvency ratio As a result, lenders will be more ready to

extend funds to enterprises with this low ratio. It must be realized that SABIC may improve

profitability while also maintaining positive solvency in the long run. To minimize total debt,

SABIC does not need to sell assets; instead, SABIC may assess its present business structure,

focus on additional equity growth, and continue to reinvest earnings in operations and expansion

plan. As oil prices fluctuate, the corporation should also focus on increasing sales. As a result, it

will increase profitability and assure credit worthiness.

Question 4: Designing Governance Framework

Decision-making in management always entails the ongoing management of ambiguity

and a significant degree of complexity due to uncertainties and the inherent political aspect of all

decision-making processes. This paper contends that in order for management accounting to

effectively deal with ambiguity and uncertainty, both must be welcomed, rather than suppressed,

through the design of data visualizations created by management controls as decision-making

aids.

In his book on rhetoric, Paolo Quattrone explains how the accounting systems of the

Jesuit Order were rhetorical in character and engaged users through linkages with the art of

remembering. Quattrone's supporting arguments were similarly complicated, each with the

possibility for more debate, and it would be hard to give them credit individually. Following the

rhetoric principles of governor Jesuit order of accounting and management, the following

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proposed framework will flowing with the SABIC Company for effective management and

accountability.

Adopt procedures
for elevating,
Create chances for
praising, and
conversation
mediating opposing
opinions.

Simplifying
coordinating
Make use of systems to invite
pictures to aid scruitny and
comprehension generate new way
of constructing
knowledge

Principle

One: Create chances for Conversation

Uncertainty cannot be avoided entirely. Taking data at face value and giving

organizations with seemingly obvious answers, on the other hand, might hinder vital (and

helpful) debate. Rather of depending on figures for solutions, this concept is built on accepting

uncertainty and generating opportunity for frank communication. Following Jesuit Ordering "the

Spiritual Exercises as an analytic approach of knowledge ordering," the organization should

bring together all team members because their cumulative successes transcend the individual

achievements. The team's contribution is larger than the sum of its members due to coordination

and teamwork.

Principle Two: Adopt procedures for elevating, praising, and mediating opposing opinions

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 In an organization like SABIC Company it is necessary to experience diverse opinions

and rational doubts can be voiced when opportunities for dialogue are offered. Rather of

attempting to eliminate uncertainty, this approach suggests that procedures be developed to

"increase and celebrate doubt." Raising doubts is a beneficial, not a bad, behavior in the context

of decision-making under ambiguity. Furthermore, expressing questions can lead to productive

conflicts and the generation of new knowledge. A method of inquiry that embodies the

company's cultural values underpins SABIC's approach to understanding and shaping

uncertainties related to its investment plans. Four of these principles govern how business

partners accept and moderate multiple points of view to guarantee that each investment proposal

adds value.

Principle Three: Make use of pictures to aid comprehension

Traditional accounting methods (such as Excel spreadsheets) might make it difficult to

address multiple views and investigate real-world uncertainty, but simple visualizations can help.

It can clarify and offer the knowledge required to identify and handle misunderstandings

constructively. Simple visuals, rather than precise accounting figures, should be utilized

wherever feasible to help businesses deal with uncertainty, according to this school of thought.

According to the Jesuit Order, "the Spiritual Exercises as a composition of imageries," the moral

inventory of the self was the beginning of an imaginative trip that was compulsively punctuated

by visualizations that would finally lead to a choice. And it is in these places that most

commercial encounters take place. As a result, you take on the position and priorities of that

functional division" (CFO).

Principle Four: Streamlining coordination systems to encourage criticism and promote new

methods of knowledge construction

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 If indeed the reporting system is overly sophisticated, it may convey the impression that

it is comprehensive and does not need further verification. Accounting and reconciliation

systems may collaborate with other business systems to identify diverse points of view, start

dialogues, and build new knowledge by making information easily accessible. According to this

approach, accounting and reconciliation systems should be used to assist inspections rather than

supply answers, and they should be as simple as feasible. Quattrone (2015) focuses on Jesuit

ordering because it is rhetorical in nature. Jesuits also consider motivating rituals that can be

used in SABIC Company such as investment applications helps create alignment between

investment ideas and project implementation, as well as successfully managing project

outcomes. The company allows business partners to collaborate with project owners, participate

in large-scale real-time discussions about potential for improvement, and validate project

delivery through research and mediation differing perspectives on potential solutions to potential

problems.

Conclusion

In order to optimize the firm's added value, the corporation must maintain strong

governance standards, which may be done by effective strategic planning, risk management,

transparency, and social and environmental responsibility, in addition to legislative corporate

governance obligations. SABIC must establish its own corporate governance framework, which

outlines roles, responsibilities, and decision-making, action, and follow-up methods. It also

describes how the company's key governing bodies connect, integrate, and coordinate their

operations.

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References

French, D., & Sayegh, H. A. (2016). Saudi’s SABIC says can cope with more petrochemicals

competition. Reuters. Web.

Illinois Department of Commerce and Economic Opportunity. (n.d). A Simple Guide to Your

Company’s Financial Statements. Springfield, Illinois: Small Business Development

Center.

Market Information Trading Co. (2016). Saudi Basic Industries Corp. Web.

Saudi Basic Industries Corp. (2015). Consolidated Financial Statement 2015. Web.

Saudi Basic Industries Corp. (2016). Our Company. Web.

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 APPENDIX

SABIC COMPANY FINANCIAL STATEMENT OF ACCOUNT

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