Financial Analysis Report of BHP
Added on 2022-08-14
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Running head: FINANCIAL ANALYSIS REPORT
FINANCIAL ANALYSIS REPORT
Name of the student
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Author Note
FINANCIAL ANALYSIS REPORT
Name of the student
Name of the University
Author Note
1FINANCIAL ANALYSIS REPORT
Executive summary
BHP is an Anglo-Australian mining company that deals with metals and petroleum as well. It
has it headquarter situated in Melbourne, Victoria and has dual-listing. Based on market
capitalization, it is the world’s biggest mining firm and third biggest company from Australia
by revenue. The formation of BHP dates way back in 2001, resulting out of a merger between
BHP and Anglo-Dutch Billiton Plc. BHP primarily deals in mining activities relating to coal,
petroleum, iron ore and copper and has operations spread in Australia, Trinidad and Tobago,
Algeria, U.S and the U.K (Bhp.com 2019). The Financial analysis report aims at
interpretation of the financial statements of BHP and thereby making available such
information to the external investors in order to assist them in taking prudent investment
decisions.
Analysis and Interpretation
The key financial indicators and their implications are as follows:
Gross Profit ratio: It is a profitability ratio which is a key indicator of efficiency in
manufacturing. It is the aggregate gain in profit without deduction of the fixed costs of
operations (Evans and Mathur 2014). It is calculated by dividing the Gross Profit by Net
Sales. The Gross Profit Ratio of BHP in 2019 is 36.73% and showed a slight increase from
the previous two years indicating a better management of cost of sales as compared to last
two years.
Net Profit ratio: It is the financial indicator of the all-inclusive profitability of the company
depicting the effectiveness and efficiency of the management in managing the expenses
(Hawaldar, Lokesh and Biso 2016). It is the ratio of Net Profit to Net Sales calculated by
dividing Net Profit by Net Sales. The financial analysis shows that the Net Profit ratio has
Executive summary
BHP is an Anglo-Australian mining company that deals with metals and petroleum as well. It
has it headquarter situated in Melbourne, Victoria and has dual-listing. Based on market
capitalization, it is the world’s biggest mining firm and third biggest company from Australia
by revenue. The formation of BHP dates way back in 2001, resulting out of a merger between
BHP and Anglo-Dutch Billiton Plc. BHP primarily deals in mining activities relating to coal,
petroleum, iron ore and copper and has operations spread in Australia, Trinidad and Tobago,
Algeria, U.S and the U.K (Bhp.com 2019). The Financial analysis report aims at
interpretation of the financial statements of BHP and thereby making available such
information to the external investors in order to assist them in taking prudent investment
decisions.
Analysis and Interpretation
The key financial indicators and their implications are as follows:
Gross Profit ratio: It is a profitability ratio which is a key indicator of efficiency in
manufacturing. It is the aggregate gain in profit without deduction of the fixed costs of
operations (Evans and Mathur 2014). It is calculated by dividing the Gross Profit by Net
Sales. The Gross Profit Ratio of BHP in 2019 is 36.73% and showed a slight increase from
the previous two years indicating a better management of cost of sales as compared to last
two years.
Net Profit ratio: It is the financial indicator of the all-inclusive profitability of the company
depicting the effectiveness and efficiency of the management in managing the expenses
(Hawaldar, Lokesh and Biso 2016). It is the ratio of Net Profit to Net Sales calculated by
dividing Net Profit by Net Sales. The financial analysis shows that the Net Profit ratio has
2FINANCIAL ANALYSIS REPORT
increased in the recent year as compared to the previous year’s depicting efficiency in
management.
Return on Assets: Return on Assets shows the efficacy of the organization in utilizing its
assets. A higher return on assets shows efficacy of management and vice-versa. The analysis
shows a 9.11% ROA and any increase in ROA above 5% are considered good. The ROA in
2019 is better than the previous two years depicting the increase in efficiency of
management.
Return on Investment: It shows the relationship between the Net Income and the Owner’s
Equity depicting the efficient utilization of available equity investment (Islam 2014). On an
average, 10% to 14% ROI is needed by an organization so that future investments could be
funded with ease. In 2019, the ROI is 17.72% which can be considered as a good return and it
also showed a considerable increase in comparison with the previous years.
Earnings per share: It is the organization’s profit divided to each shareholders. It is
calculated by dividing the Net income by the number of shares outstanding. The earnings per
share in 2019 is positive and have considerably increased as compared to the last years
depicting a rise in net income.
increased in the recent year as compared to the previous year’s depicting efficiency in
management.
Return on Assets: Return on Assets shows the efficacy of the organization in utilizing its
assets. A higher return on assets shows efficacy of management and vice-versa. The analysis
shows a 9.11% ROA and any increase in ROA above 5% are considered good. The ROA in
2019 is better than the previous two years depicting the increase in efficiency of
management.
Return on Investment: It shows the relationship between the Net Income and the Owner’s
Equity depicting the efficient utilization of available equity investment (Islam 2014). On an
average, 10% to 14% ROI is needed by an organization so that future investments could be
funded with ease. In 2019, the ROI is 17.72% which can be considered as a good return and it
also showed a considerable increase in comparison with the previous years.
Earnings per share: It is the organization’s profit divided to each shareholders. It is
calculated by dividing the Net income by the number of shares outstanding. The earnings per
share in 2019 is positive and have considerably increased as compared to the last years
depicting a rise in net income.
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