Financial Analysis | BHP Billiton limited

ACCOUNTING AND
FINANCE

Contents
Introduction................................................................................................................................2
BHP Billiton limited..................................................................................................................2
Fortescue metals group..............................................................................................................2
Interpretation and evaluation......................................................................................................3
Ratio Analysis............................................................................................................................3
Horizontal common size analysis...............................................................................................9
Vertical common size analysis.................................................................................................11
References................................................................................................................................13

Introduction
Financial analysis is the procedure of evaluating projects, budgets, and businesses to
determine the suitability and performance. The report analyse the financial analysis of two
companies of mining industry. Financial analysis conducts by focusing on ratios and
conducting comparison between both the organisations named as BHP Billiton limited and
Fortescue metal group limited. For vertical and horizontal analysis, common size analysis is
the way through which each element of the financial statement is measured as a proportion
base for same period. For this, the company can use and analyse through balance sheet and
income statement. Moreover, it is important to conduct common size financial statement
analysis displaying all the particular items as a proportion of common figure rather than the
exact numerical figures. This analysis is conducted to examine the financial statement by
comparing it within the organisation (Brigham, & Houston, 2012).
BHP Billiton limited
BHP Billiton limited is ASX registered multinational mining, petroleum and Metal Company.
The company is headquartered in Victoria, Australia. In 2017, BHP Billiton is the largest
mining organisation based on market capitalisation. The company offers coal, petroleum,
natural gas, uranium, and nickel with current employee base of 62000 people. In 2018, the
revenue generated was 43.638 billion dollars. In 2018, the operating income is US$ 17.561
billion. In 2018, net income is US$ 4.823 billion in 2018. Total assets owned is estimated at
US$ 111993000000 (BHP Billiton limited, 2018).
Fortescue metals group
Fortescue metal group limited is an ASX registered iron ore organisation. Fortescue is fourth
largest producer of iron ore after Rio Tinto, and BHP Billiton. The company is headquartered

in Western Australia by offering products such as Steel, Copper, Gold, Iron ore and Lithium.
The organisation was founded in 2003. Currently, the company has been serving worldwide.
In 2019, the revenue is estimated at 14.37 billion dollars. In 2019, the operating income is
nearly 8.84 billion dollars. In 2019, net income is estimated at $4.71 billion. In 2019, total
assets are estimated at $22.26 billion and total equity is estimated at $22.26 billion. Currently,
the company has an employee base of 5455 (Fortescue metal group, 2018).
Interpretation and evaluation
Ratio Analysis
For analysis, first tool used is ratio analysis.
For the liquidity analysis, liquidity ratios are calculated, which are among the class of
financial metrics utilised to predict the company`s ability to pay off the current obligations.
Example of liquidity ratios cover Current ratio and quick ratio (Shapiro, & Hanouna, 2019).
Current ratio-
2018 2019
0.00
0.50
1.00
1.50
2.00
2.50
3.00
1.33 1.37
2.51
1.89
fortescue metals group
BHP billiton limited
(Refer to excel file)