BHP Billiton Ltd: Financial Performance and Risk Profile

Managerial Finance
2019

BHP Billiton Ltd
Executive Summary
To understand the performance and the functioning of a company it is essential to assess the
financial statements of the company. In this report, BHP Billiton, a pioneer in the field of
mining is selected. The report revolves around the main prospects of the company. It initiates
with the company followed by the risk profile of the company. The systematic, as well as
unsystematic risk of the company is clearly defined. Further, the financial performance of the
company is assessed with the aid of the financial report. other components such as time value
of money together with sources of finance and dividend payout policy is reflected in the
report.
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BHP Billiton Ltd
Contents
Executive Summary............................................................................................................2
1....................................................................................................................................4
2. Introduction............................................................................................................4
1. Risk Profile..............................................................................................................4
2. Overall financial performance................................................................................6
3 Ratio Analysis.............................................................................................................7
3.1 Profitability ratios....................................................................................................7
3.2 Efficiency ratios......................................................................................................7
3.3 Liquidity ratios........................................................................................................8
3. Time Value of Money..............................................................................................9
4. BHP Billiton finance policy......................................................................................9
5. Payout policy........................................................................................................11
Conclusion...................................................................................................................12
References..................................................................................................................13
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BHP Billiton Ltd
1.Introduction
BHP Billiton Ltd and BHP Billiton Plc are the two categorized section of the BHP Billiton
Company with categorization in their working principle and processes and policies as well.
Processing and mining of oil, gases and other raw materials are the main fields of work of the
company. No pressure to the company is seen because of the friendly nature and selling of the
produced items worldwide. The policy of the company is set in a way in which patience is the
key for the investors as the company believes in putting money on those terms which are low
now but will reap better profits in the future (BHP Billiton, 2018). The safeguard and the
cleanliness of the environment for the ranging people in the area is also a matter of attention
for the company. Previous records and the actions of the company and the actions highlight
that the company has been clean and honest to its policies but there can be times of distorting
in which the company may think about its own welfare.
2.Risk Profile
Systematic and unsystematic risk
Systematic risk is the risk that is associated with the overall market or the segment under
which it operates. On the other hand, the unsystematic risk is the one that is linked to the
particular industry or security. Only the unsystematic risk can be eliminated through the
process of diversification.
For a giant like BHP Billiton operating on a global scale the presence of systematic and
unsystematic risk is obvious.
Unsystematic risk
Rising costs
It has been observed that the cost of the BHP Billiton is very susceptible to inflationary
pressure is because of the changes in prices of the commodities in different periods. The
incremental changes of the organization that are helping it to operate in the mines are also
trying to increase the costs. The increasing complexity in the use of technology and changing
the workforce by increasing investment have also been a major factor to increase the costs
(BHP Billiton, 2018). For the removal of these costs, the organization needs to:
• Carry out sustainable cost reduction programs.
• Review the capital structure of the organization.
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