Financial and Economic Interpretation of BHP Billiton's Financial Performance

1
FINANCIAL AND ECONOMIC INTERPRETATION
Executive Summary:
The report provides information regarding the financial performance of BHP Billiton
over the period of the two years. The analysis of the financial performance of the organization is
mainly conducted in the assessment, where its profitability ratio, liquidity ratio, financial
stability ratios and cash flows statement is analyzed to determine the current financial trajectory.
In addition, the analysis is based on the financial report of BHP Billiton for the year 2018, which
provide both the financial perspective and non-financial perspective of the company. The
analysis will provide adequate information to the investor regarding the current financial
performance of the company and detect whether it is a sound investment option.
Analysis and Interpretation:
1. Profitability:
2018 2017
Net
margin
ratio
0.1099008772929
25 0.1690898714569
12
1.00%
7.00%
13.00%
Profitability ratio The above figures provide information regarding
the decline in overall net margin profit of BHP
Billiton from 2017 to 2018. The net margin ratio
has declined from 16.91% in 2017 to 10.99% in
2018, which is approximately a decline of 5.92% in
the overall financial year. From the valuation, it is
detected that revenue of the company has increased
from 2017 to 2018, while decline in net income has
been witnessed during the period. This decline in
net profits is due to the high level of administrative
expenses, which is being conducted by BHP
Billiton. Moreover, the calculations also indicate
that the BHP Billiton has to reduce its
administrative expenses and loss from discounted
operations for increasing the level of income in
future.
2. Liquidity and Financial Stability:
2018 2017
Quick
ratio 2.242190292372
58 1.529385887735
35
0.25
0.75
1.25
1.75
2.25
Liquidity ratio The liquidity ratio of the organization provides
information regarding its current financial capability.
The calculation provides information regarding the
quick ratio of the company, which is at great position.
The company has a quick ratio of 2.24 in 2018, which
has increased from 1.53 in 2017. This increment in
liquidity ratio of the company will ensure that the
management can pay of all its short-term financial
obligations and conduct the operations without
hindering the fixed assets. Therefore the calculation
provide viable information regarding the current
position of the company