Comparative Analysis of Financial Performance of BHP Billiton Ltd and CSR Ltd

Assignment 2

Executive Summary
In this report, the financial performance of the two companies, BHP Billiton Ltd and CSR
Ltd has been compared for the last three years. Their cash flow statement has been compared
and commented from edge to edge, which will give a clear picture and understanding of
financial health of both the companies. Further, deferred tax asset and deferred tax liability
has also been considered, which arises generally due to the timing difference. The cash tax
and cash tax rate calculation has been done for both the companies.

Table of Contents
Executive Summary...................................................................................................................2
Statement of change in equity....................................................................................................4
BHP Billiton...........................................................................................................................4
CSR Ltd..................................................................................................................................4
Cash flow statement...................................................................................................................5
BHP Billiton Ltd.....................................................................................................................5
Cash flow statement of CSR Ltd............................................................................................8
Comparative analysis of cash flow statement of BHP Billiton Ltd...........................................9
Comparative Analysis of Cash Flow Statement of CSR Ltd.....................................................9
Comparison between cash flow statements of both companies...............................................10
Items reported in comparative income of BHP Billiton Ltd and CSR Ltd..............................10
Items not reported in Comparative Income Statement.............................................................11
Reason for not reporting these items........................................................................................11
Should comprehensive income be included?...........................................................................11
Income tax expenses shown in balance sheet..........................................................................12
Effective tax rates of both companies......................................................................................12
Deferred tax liability................................................................................................................12
Increase or decrease in the deferred tax assets or in the deferred tax liability.........................13
Cash tax amount for both companies.......................................................................................15
Cash tax rates for both companies...........................................................................................16
Cash tax rate vs. the book tax rate............................................................................................16
References................................................................................................................................17
Appendix..................................................................................................................................18

Statement of change in equity
BHP Billiton
From the table 1, it can be seen thatthere is no change in the shares capital of BHP Billiton
Ltd and BHP Billiton Plc. that means no shares have been issued to them(BHP, 2018).Total
Comprehensive income is showing negative balance, which means that income is not fruitful
for the company any more(Demirgüç-Kunt & Maksimovic, 2002).There is a slight decrease
in the value of Reserves due to the employees shares awarded forfeited and net employee
contributions. The retained earnings are reflecting positive balance as entire change was in
positive (Chandra, 2008).Non- controlling interest is reflecting a slight change, when
compared with the previous year’s figure.
CSR Ltd
From the table 2, it can be seen Issued capital and Reserves for CSR Ltd is almost similar for
both the years.In Reserves, at the end of the year, negative balance is reflecting, which means
that there is payment for the uncertainty which the company has not accounted in
provision(CSR Limited, 2018).Retained Profit has increased in the year 2017, which means
that company has retained their profit for their development and smooth functioning for
longer run. Non-controlling interest has increased more than double which indicates that the
company’s ownership is getting diluted by third parties and hence, liability to pay dividend
also increases in future(Ohlson, 2009).

Cash flow statement
BHP BillitonLtd
From the table 3, it can be inferred that there are has been a good increase of sales and
income in the year 2017 when compared with 2016 and 2015. In 2016, the company has
experienced uncertainty losses. Non- operating exceptional items has reduced more than ten
times when compared with the last year’s figure. Depreciation and amortization expense has
slightly reduced when compared with the last two years, which means the company has
disposed their assets. Impairment of property, plant and equipment, financial assets and
intangibles has reduced more than fifty percent in 2016 when compared with 2015. However,
in 2017 these values have slightly decreased. The company has disposed few assets in 2016
and 2017 due to which, impairment of assets also got reduced. Net finance cost has increased
by almost fifty percent when compared with 2016, which means liability increases in the
current year. In 2016, the value of net finance cost was just half when compared with 2015.
The company has increased their loans and hence, their cost also increases(Henderson et al.,
2015).
Shares of operating profit of equity accounted income were following a decreasing trend
from 2015, as the performance level reduced from the previous years. Trade and receivables
have fallen down drastically in the year 2017 compared with 2015 and 2016. It may be
because of reduction in sales or the company has received the amount before the completion
of the financial year. Inventories were reflecting negative balance which means the company
is facing inventory issues in the year 2017. Trade and payables both have a positive balance
when compared with 2016 and 2015. Hence, the company is either unable to pay their vendor
on the due date, whichleads to increase in creditors list or they are making purchases at the
end of the financial year which enhances the creditors list.Provisions and other assets and
liabilities have shown a slight decrease in 2017(BHP, 2018). Dividend received has just

increased to double when compared with the last year’s figure, which means the company has
invested their fund in shares and equity accounted investments.
Interest received and interest paid are following an increasing pattern, which means the
company has given a loan to the third party and repayment of interest-bearing liabilities also
increased (Mlachila & Chirwa, 2002). Settlement of cash management related instruments is
showing a negative balance that means the company is facing adverse consequences while
settling the cash related instruments. Purchase of property, plant and equipment has increased
almost half times in 2016 when compared with 2015 that means the company has purchased
assets in 2016. However, in 2017 there is slight decrease in the purchase of property.
Exploration expenditure has increased from 2016, which means the expenses have increased.
However, it has reduced in 2016 as compared to 2015 which means the company has not
increased exploration.The exploration expenditure form an important part of the cash flow
statements (Ronald, 2010).
Proceeds from sale of assets has increased more than five times which means the company
has sold their assets in huge quantity in 2017 when compared with 2016.
Proceeds from divestment of subsidiaries, operations and joint operations have decreased in
2016 when compared with 2015. In 2017, it is slightly increased which means the company is
increasing the list of subsidiaries. Proceeds from interest-bearing liabilities have decreased
drastically when compared to 2016. In 2016,it became half as compared to 2015, which
means the company is not taking any further loans on interest. Proceeds from debt related
instruments increased in 2016 as compared to 2015 but, it again decreased in 2017 which
clearly states that the company is not dependent on debt much(United States. Bureau of
Internal Revenue, 2011). Repayment of interest-bearing liabilities has increased drastically in
2017which means that the company paid all loans in 2017. Purchases of ESOP trust has
slightly increased from 2016. However, it got reduced by fifty percent from 2015 that means