Financial & Economic Interpretation || Report

FINANCIAL & ECONOMIC
INTERPRETATION

Executive summary
The report brings out a discussion financial and non-financial performance of BHP Billiton.
The company is a multinational organisation, which deals in mining, petroleum, metal with
dual listed public organisation that is headquartered in Australia (BHP Billiton, 2019). The
company listed on Australian securities exchange as it is one of the largest organisations with
the help of market capitalisation. The report brings out ratio analysis, which assess the
financial situation helping external stakeholders to think of investing in this company.

Contents
Executive summary..................................................................................................... 1
Resource-A............................................................................................................... 3
Analysis................................................................................................................... 3
Interpretation............................................................................................................. 3
Resource-B............................................................................................................ 4
Non-financial indicators................................................................................................ 6
Conclusion................................................................................................................ 7
References................................................................................................................ 8

Resource-A
Analysis
The analysis has been undertaken through financial measures and non-financial measures.
Financial analysis will include ratio analysis, which is seen that this tool is comparison of
items in financial statements so that they can evaluate liquidity, profitability, and efficiency
of the operations. Evaluation of profitability can be conducted through Gross profit margin,
net profit margin, return on capital employed, operating profit margin, and return on equity.
Gross profit margin is calculated through divided by proportion of sales to gross profit. Profit
margin defines the level of changes and generation of profits from business operations, which
an organisation use to assess the financial health. Further, solvency ratio evaluates the level
of capability of the organisation to pay its debt and long-term bill. Liquidity refers to the
capability of organisation to accomplish financial obligations, which are short-term debts.
Efficiency ratios is used to examine how well the company utilises the assets and liabilities.
Interpretation
The liquidity position of BHP Billiton is defined through current ratio, which depicts the
ability of the company to pay off short term obligations. The two prominent ratios include
current ratio and liquidity ratio. The current ratio of BHP for 2019 is 1.89, which indicates
that the company has 1.89 times liquid asset to pay off one current liabilities (BHP Billiton,
2019). The ideal for current ratio is 2:1. Quick ratio is 1.58 where the ideal ratio is 1:1. BHP
has been maintaining appropriate liquid assets to pay off liabilities. The company is
experiencing boost and improvement in liquidity positioning, which indicates high inventory
and increase in account receivables with low current liabilities (Bismark, Kofi, Frank, and
Eric, 2018).