ASSIGNMENT ON ACCOUNTING AND FINANCE OF BHP

ACCOUNTING AND
FINANCE AAF044-6
Main Assignment - Two
SAIMA SADIA SHEFA
STUDENT ID: 2016948

Table of Contents
1.0 Introduction
2.0 Capital investment decisions techniques
2.1 Discounted cash flow techniques
2.1.1 PayBack Period
2.1.2 Accounting rate of return
2.2 Non-discounted cash flow techniques
2.2.1 Net Present Value
2..2.2 Internal rate of return
2.2.3 Profitability Index
2.2.4 Discounted Payback Period
3.0 Benefits of budgeting and planning in organizations
3.1 Advantages of Capital Budgeting
3.2 Limitations of Capital Budgeting
4.0 The Concept Of Corporate Governance
4.1 Role of Shareholders in Corporate Governance
4.2 Board of directors in Corporate Governance
4.2.1 Role of Board of directors .......................................................................12
4.3 Comply & Explain ......................................................................................13
5.0 Conclusion
6.0 References
1 | Accounting and Finance (AAF044-6) Main Assignment two

1. Introduction
BHP Group (formerly BHP Billiton) is the Australian public corporation along with BHP
Group Plc based in the UK, form the BHP Group. It is the largest mining company in
the world and Australia's most valuable company for its market capitalization. BHP
was incorporated in 1885, while Billiton roots trace back to 1851. In 2001, Billiton
merged with the Broken Hill Proprietary Company (BHP) to form BHP Billiton.
Company core objectives are - creating sustainable value for its shareholders,
employees, contractors, suppliers, customers, business partners and host
communities.
The company produces Iron ore and nickel in Western Australia, metallurgical (steel-
making) and energy coal in Queensland and New South Wales, and copper in South
Australia. It also operates projects in Canada, Chile, Peru, the United States,
Colombia and Brazil to produces copper, iron ore, coal and potash. Its petroleum
business operates in Gulf of Mexico, Australia and Trinidad & Tobago.
BHP is a multinational company with operations on six continents and offices in more
than 100 countries (Dick, 2007). Company’s Global headquarters is in Melbourne,
Australia and Corporate office based in London, UK.
BHP Group is operating as a Dual Listed Company, with two parent companies: BHP
Group Limited, which is listed on the ASX and the New York Stock Exchange (NYSE)
under the symbol BHP, and BHP Group Plc, which is listed on the London Stock
Exchange and the Johannesburg Stock Exchange under the symbol BHP and on the
NYSE under the symbol BBL.
Company’s Financial Challenges
BHP operates globally and company's main mission is to create long-term
shareholder value for natural resources around the world. The company has a track
record of providing significant shareholder returns by heavily investing in mining
projects for a long time. Apart from serving the needs of its customers and rising
economies, the company is devoted to protecting the communities in which it
operates as well as the environment (Thompson and Macklin 2009).
The company faces significant financial difficulties because of its recent decision to
postpone expansion plans for some of its key projects and had to put billions of
dollars on hold. The issue emerged after the company joined its competitors in
delaying expansion plans due to the global financial crisis.
Another strategy for overcoming these challenges is to reduce income-expenditure
and real wages. The company also chose to decrease prices in order to manage
commodity prices, which worsened the situation.
2 | Accounting and Finance (AAF044-6) Main Assignment two

2.0 Capital investment decisions techniques
Companies across the world expand by launching new initiatives and making
investments in various industries and areas. The research and subsequent appraisal
of these initiatives mainly based on economic, cost, and financial data. Investment
appraisal techniques helps managers in determining the financial sustainability of
individual projects as well as making decisions such as the purchase of land,
machinery, buildings, or equipment etc.
Feasibility of any project or decisions making process usually done by using different
techniques and each technique assesses the project from a different perspective and
delivers a different insight. These techniques can be classified into two parts:
 Non-discounted cash flow techniques.
 Discounted cash flow techniques.
2.1 Non-Discounted cash flow techniques
This is the traditional method and it does not consider the time value of money. To
put it another way, all future dollars are presumed to have the same value as
today's money. Non-discounted cash flow strategies include the following two
techniques:
 Payback period
 Accounting rate of return
3 | Accounting and Finance (AAF044-6) Main Assignment two