Accounting for Finance and Manager | BHP Billiton

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Added on 2019-11-20

Accounting for Finance and Manager | BHP Billiton

Added on 2019-11-20

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ACCOUNTING FORFINANCE & MANAGERSTUDENT ID:[Pick the date]

Accounting for Finance and Manager | BHP Billiton_1

ACCOUTNING FOR FINANCE & MANAGEREXECUTIVE SUMMARYIn wake of the falling commodity prices and the visible turbulence in the mining companies,BHP Billiton has been selected as the company for which financial performance analysis hasbeen carried out. The key enabling tool in this regard has been taken as ratio analysis and thetime period for consideration has been taken as FY2012-FY2016 as it represents a transitionperiod for the mining industry. Various ratios such as profitability, liquidity, solvency andefficiency have been computed using the financial statements and interpretations have beendrawn about the performance of the company. Based on the existing environment and thepast financial performance of the company, view has been presented with regards to thelikely future performance of the company. 1

Accounting for Finance and Manager | BHP Billiton_2

ACCOUTNING FOR FINANCE & MANAGERTABLE OF CONTENTSINTRODUCTION.................................................................................................................................2CRITICAL ANALYSIS........................................................................................................................3Profitability Ratios.............................................................................................................................3Efficiency Ratios...............................................................................................................................5Liquidity Ratios.................................................................................................................................6Solvency Ratios.................................................................................................................................7CONCLUSION.....................................................................................................................................8REFERENCES......................................................................................................................................9APPENDIX.........................................................................................................................................112

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ACCOUTNING FOR FINANCE & MANAGERINTRODUCTIONThe company selected is BHP Billiton which is a leading mining company based out ofAustralia. It was formed in 2001 as a result of the Australia based BHP group and UK basedAnglo Dutch Billiton Plc. The business of the company is divided across five verticalsnamely iron ore, coal, petroleum, potash and copper. The company has mine presenceworldwide with majority of them located in Australia, South America, USA, Canada andAfrica. The company is listed on both the ASX (Australia Stock Exchange) and LSX(London Stock Exchange) and has a market capitalisation in excess of $ 110 billion (BHPBilliton, 2016). The mining sector has recently been in quite a lot of turbulence on account ofthe falling commodity prices. While it is a testing time for these companies, but from aninvestor perspective this provides an opportunity for investment. Keeping this in mind, theobjective of the given report is to highlight the financial performance of the companyconsidering the available financial statements for the last five years. Based on the analysis ofthe financial performance and the underlying parameters, the guidance for future financialand market performance would be offered.CRITICAL ANALYSISFor the purpose of analysis of the financial performance of the company, a period of last fiveyears i.e. 2012-2016 has been chosen. The reason behind choosing this period is todemonstrate the linkage between the financial performance of the company and thecommodity pricing cycle. In order to critically analyse the same, the key tool that has beendeployed is ratio analysis. It is an enabling tool which tends to highlight the performance ofthe company in various aspects and has been preferred over trend analysis which does notbifurcate the financial performance in this manner. The critical analysis of the company’sfinancial performance through ratio analysis is discussed below.3

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Accounting for Finance and Manager | BHP Billiton