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Document on BHP Billiton- Mining Company

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Added on  2020-02-24

Document on BHP Billiton- Mining Company

   Added on 2020-02-24

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Slide 1– BHP Billiton is one of the largest mining companies in the world which isheadquartered in Victoria. Australia. The company is listed on the ASX and has a currentmarket capitalisation of about $ 111 billion making it the fourth largest company inAustralia. The company came into existence in 2001 through the merger of the Australiancompany (BHP) and UK based Billiton Plc. BHP has five major business verticals namely ironore, coal, copper, potash and petroleum. Also, the mines have a wide geographical coverageincluding Australia, North America and South America as highlighted.Slide 2- Two key stakeholders which depend of financial statements are shareholders andlenders. The shareholders tend to focus on EPS which in turn is driven by profit margins. Thisis essential in determination of share price. The going concern assumption needs to bevalidated through the liquidity while the credit risk is represented by capital structure. Thedividends are captured in cash flows which act as a pivotal income source. For the lenders,liquidity and solvency ratios are critical which are determined from the balance sheet asthey indicate the creditworthiness. Also, operating profit and cash flow from operationsindicates the ability to meet the interest obligations.Slide 3- Two other stakeholders of importance are contractors and employees. In the miningbusiness, role of contractors is pivotal. Contractors tend to analyse the income statement tocapture the likely growth of business along with profitability which in turn determine theirfuture business. Further, the balance sheet and cash flow through liquidity positionindicates the ability of the firm to clear their outstanding payments in a timely manner.Employees analyse income statement to determine their present and future bonuses whichis driven from company’s profits. Further, the ability to meet employee expenses is reflectedfrom short term liquidity measures.Slide 4 – One of the key parameters of the income statement is the revenue as it drives theprofitability of the business. This in turn reflects the trend in commodity pricing which owingto cyclical trends is pivotal. With regards to expenses, the largest expense is cost of revenuewhich essentially indicates the efficiency but is less vital than the income. Considering thecapital intensive nature of mining business, majority of the assets are in the form of fixedassets i.e. PP&A. An increase in this aspect auger well for the future. Further, from shortterm liquidity perspective, cash is imperative.
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