Financial Analysis and Conceptual Framework of OZ Minerals Company

This report evaluates the financial performance of OZ Minerals and its adherence to AASB and fair conceptual frameworks. It includes a comparison with BHP Billiton Company and suggests investing in OZ Minerals for long-term value creation.

OZ Minerals Company
Financial analysis and Conceptual Framework
Corporate Finance
Name of the Student-

Executive Summary
The accounting and conceptual framework of organization assists in recording and
reporting of the business transactions in the business. This report has reflected the assessment
of the financial performance of OZ Minerals and how well it has managed its business
throughout the time. OZ Mineral has maintained strong financial performance in its business
and also maintained low debt capital in its business. It is divulged that company has low
financial leverage but faced issue with the high cost of capital. In addition to this, increased
profitability will make easy for organization to create value on the investment in effective
manner. If shareholders or investors invest their capital in OZ Minerals then it will assist
them to create value on their investment.

Table of Contents
Executive Summary...............................................................................................................................1
Introduction...........................................................................................................................................2
Description of company.....................................................................................................................2
Critical analysis of Annual report of OZ Minerals and consideration to adherences to AASB and
fair conceptual frameworks...............................................................................................................2
Analysis the financial performance of OZ Minerals and its comparison with the competitors company
named BHP Billiton Company..............................................................................................................4
Conclusion.............................................................................................................................................6
References.............................................................................................................................................7

Introduction
With the ramified economic changes, every organization has been using financial
analysis tools to identify the weakness and issues in the financial performance. There are
several financial analysis tools such as DU pont analysis, Economic value added analysis,
ratio analysis which could be used to analysis financial and busienss performance of
company. In this report, OZ Mineral Company has been taken for the assignment. In the
starting, conceptual framework of accounting and compliance with the general purpose of
financial reporting has been evaluated. After that ratio analysis of company has been taken
into consideration to evaluate the financial performance and how well company has been
used its capital in its business. However, if investors want to increase their investment value
then they will have to invest their capital in long run.
Description of company
Oz Minerals Company is modern mining company based in Adelaide Australia which
is indulged in offering mining stones and other minerals to clients in Australia. The currently
company is traded at the current share price OZL (ASX) A$ 9.56 +0.30 (+3.29%) which is
3% higher when it is compared to the data of last year data. The present CEO of company is
Andrew Cole (OZ Minerals.2017). OZ Mineral Corporation is listed on Australian security
exchange (ASX). It has a growth strategy which is focused on the creating the values for the
stakeholders and stakeholders includes creditors, employees, directors, suppliers, owners,
government, and community.
Critical analysis of Annual report of OZ Minerals and consideration to adherences to
AASB and fair conceptual frameworks
According to the Australian accounting standard (AASB), technical issues that could be
identified by the international organization through International accounting standards board
(IASB) or the IFRS Interpretation committee (IFRIC) are related to the fact that International
public sector accounting standard board (IPSASB) are monitor or controlled by the AASB
and it is based on their significance of public sector financial reporting. On the AASB work
program, the issues on the IASB work program or the IFRIC work program are also included

such as AASB identified the technical issues and If issues are related to the profit entities
then they are referred to the IASB or the IFRIC for consideration, research and consider
issues Consult with stakeholder on following documents like Exposure Drafts (EDs),
Invitations to comments (ITCs), Drafts interpretation, Discussion papers (DPs). OZ Minerals
have adopted standards and pronouncements not early adopted AASB 15 Revenue from
contracts with customers. In addition to this, lease agreements and contracts have been
handled by AASB 16 Leases –Review of their results and operation OZ Minerals maintained
a strong and healthy financial performance and position in 2017.While we are comparing to
other period, the gold sales are increased, the production of copper was lower in 2017,
commodity prices are increased. Company has kept the cash and other equivalents balance of
$655.7 million in 2016 and decreased $31.2million in 2017. Company has also made
payment to its shareholders amount $49.1 million. In addition to this, the Investment in the
carrapateena project of $45.8 million and Income tax payment of $69 million, balance by
strong cash inflows from operations, it reflects that company has managed its cash inflow
effectively to strengthen the overall outcomes in effective manner.
In addition to this, if comparison of Revenue – compared to comparative period of 2017 then
it could be inferred that the overall profitability and cash inflow in the business is 12 %
higher and it is accompanied with the sales of Contained Copper 3%lower, Gold sales was
11% was higher. However, due to the sluggish market condition, Open pit mining unit costs
of $6.63 per tonne for the half year were higher compared to $6.15 per tonne in the
comparative period. As on declining strip ratio, the amount of deferral mining costs and other
financial data shown to the financial statement was lower by $18.1 million.
The annual report is reflected that the opinion of the directors of OZ Mineral Corporation -
According to the corporation act 2001, the financial statement gives transparent and fair view
of consolidated financial accounts. In addition to this, company has complied with the
Australian accounting standard AASB134 interim financial reporting and the corporation’s
regulation 2001. Company has a good position to believe that they are able to pay its debts
and creditors in effective manner. A mineral mining company focuses on Lean business,
multiple assets, Customer focus, and Copper core OZ Mineral has set up strong corporate
governance values and behavior and protection of stakeholder interest to strengthen the
overall outcomes and reporting frameworks. The corporate governance guidelines and
recommendation was set out by the ASX Corporate governance principles and

recommendation (ASX Guidelines). Company has also established harmonization in its
general purpose financial statement in respect with accounting standard which has assisted it
to present the true and fair financial position, performance and cash flow of an organization
to keep the business more transparent to its stakeholders. It is analyzed that when corporation
and other organization perform the accounting standards, their general purpose financial
statement should be more comparable. Financial statements also provide information which is
helpful in accountable to those who provide resources to the organization. They provide
information for the financial reporting by public sector organization not for the profit entities
in private sector.
Analysis the financial performance of OZ Minerals and its comparison with the
competitors company named BHP Billiton Company
This ratio analysis is financial analysis tool used to evaluate financial performance of
company. After evaluating the financial data of company, it has been analyzed that the
liquidity of company is really high. OZ Minerals has kept 5.06 points current ratio in 2017
which is 1 point higher when it is compared to data since last five year data. However, the
BHP Billiton Company has kept 1.25 current ratio with a view to lower down its capital
blockage in its business functioning (Weygandt, Kimmel, and Kieso, 2015). When it is
compared to the data of BHP Billiton Company, OZ Mineral has maintained high liquidity in
its business which might also negatively impact the cost of capital of organization. It has been
observed that company needs to lower down its liquidity capital with a view to strengthen its
return on capital employed position. The profitability ratio reveals the profitability of
company (Flannery, 2016). The net profit ratio of OZ Mineral Company has increased to
23% in 2017 which is 10 % higher when it is compared to the data of last three year data. On
the other hand, the net profit of BHP Billiton Company is 20% which is 2% higher when it is
compared to the data of last three year data. Both companies are performing well but when it
is compared to the data of BHP Billiton, OZ Minerals have increased its profitability
throughout the time (White, Sondh, and Fried, 2015). The gross profit ratio of company has
not increased with the increase in the net profit due to the increased operating expenses. The
return on capital employed of company has increased to 11% IN 2017 which is 7% higher

when it is compared to the data of last three year data. It reflects that company has created
value on its investment and consistently increasing the overall return on capital employed in
effective manner (Grant, 2016). It is evaluated that when it is compared to the data of BHP
Billiton, OZ Company has strong financial performance and consistently increasing its
profitability. The efficiency ratio of company divulges the details related to inventory
management turnover, creditors turnover and receivable turnover to effectively use the capital
in business (Williams, and Best, 2014.). The creditors’ turnover ratio of OZ Company reveals
company has lower down its capital blockage by keeping its creditors turnover to 33.23
points in 2017. The receivable turnover ratio has also decreased to 19.63 points which reflects
that company has decreased the payment receipt cycle throughout the time. The inventory
turnover ratio reflects the capital engaged in the inventory of the organization (Ehiedu, 2014).
OZ Company has increased its inventory turnover which reflects that company has increased
the amount of capital blockage in its inventory stocks and it might negatively impact the
overall cost of capital of organization (Mwangi, and Murigu, 2015). However, BHP Billiton
Company has faced negative business functioning which has resulted to increased cost of
capital in its business. This type of business program has shown how well company has
managed its business in long run. OZ mineral has managed its business effectively and
created value on investment throughout the time. The capital structure of OZ Minerals is
reflecting low amount of financial leverage. Company have maintained 15% debt portion in
its capital structure (Zhang, and Zhang, 2014). It is analyzed that company needs to increase
its debt portion if it wants to lower down the cost of capital and increased its overall return on
capital employed in long run. On the other hand, BHP Billiton Company has increased the
overall return on capital employed and keeps the high financial leverage. OZ Minerals should
increase its debt capital to the extent where it’s earning or profitability could easily cover the
interest payment (Baños-Caballero, García-Teruel, and Martínez-Solano, 2014). The
dividend payout ratio of company has increased to 30% of its earing which reveals that
company has been offering good amount of return to its investors out of its available earning.
It is considered that OZ Minerals needs to work on its capital structure to create value on the
investment (Wong, and Li, 2015)
After assessing the financial statement of Oz Minerals, it could be inferred that OZ Minerals
Company has maintained good amount of return on capital employed. It is considered that if
company wants to attract more investors then it will have to increase the overall dividend
payment and return available to investors (Tseng, and Chiang, 2016). On the other hand, the

business outlook and present market factors also reflects that company will surely increase its
overall profitability and market share in short span of time. It is indicator for company’s
growth and will also result to increased business value in long run. Now in the end, I could
infer that OZ Minerals has performed well enough in market and maintained strong financial
performance throughout the time. However, other rivals such as BHP Billiton and Rio Tinto
are struggling with their high cash outflow and compliance issues in their business which
have increased their overall cost of capital (Zhang, and Zhang, 2014).
Conclusion
Oz Minerals Comp any has maintained strong financial performance throughout the
time. It is analyzed that since last five years, company has increased its profitability by 22%.
The liquidity ratio of company has also reflected that company has increased its capital
investment and created value for its stakeholders. On the other hand, other rivals such as BHP
Billiton, Rio Tinto and other rivals are confronting with the sluggish market condition and
failed to override the return on investment provided by the Oz minerals. The dividend payout
ratio and financial leverage of Oz Minerals Company is very attractive and revealing
strengthens business sustainability in long run. It has shown that if investors will invest their
capital in this company then they will surely have value creation on their investment.
Nonetheless, this analysis and prediction is based on the historical trend of company. There
are possible chances that company might face sluggish market condition and associated
factors which might negatively impact the business functioning of organization (Christensen,
Nikolaev, & WITTENBERG‐MOERMAN, (2016). Therefore, after assessing all the details,
it could be inferred that if I were given $ 10,000 to invest then I will surely invest my capital
in OZ minerals. The positive business outlook and increased business outcomes will surely
increase the value of my capital investment in this company. However, I will keep my
investment invested in this company for long term so that I could get better outcomes.

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