Financial Analysis: Adelaide Brighton Ltd. and BHP Billiton Ltd.

This report provides a comprehensive financial analysis of Adelaide Brighton Ltd. and BHP Billiton Ltd., operating in the material manufacturing sector. It begins with an introduction to the principles of financial markets and the importance of transparent information for investors. The analysis includes a top-down approach, examining the economic environment of Australia, considering factors like interest rates, currency value, GDP, and inflation. The report then delves into a bottom-up analysis, evaluating the financial health of both companies using financial ratios such as current ratio, quick ratio, debt-to-equity ratio, asset turnover, and profitability ratios. The analysis reveals that Adelaide Brighton Ltd. demonstrates more favorable outcomes compared to BHP Billiton, making it a potentially more attractive investment. The conclusion summarizes the key findings and emphasizes the significance of financial market frameworks in providing accurate information for investors. The report references relevant academic sources to support the analysis.

PRINCIPLES OF
FINANCIAL MARKETS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A. Analysing economic environment of Australia with the help of top down analysis.........1
B. Determining financial health of businesses with the help of Bottom up analysis.............2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................5

INTRODUCTION
The operational practices and the efficiencies of financial market in the long run is that
there has been several variations in operations. Therefore, main motive of stock market is to
bring transparent and reliable information of an entity among the group of investors. It helps the
firms in collecting appropriate capital for development of operational practices. However, in the
present report, there will be discussion based on financial performance of Adelaide Brighton Ltd.
and BHP Billiton Ltd. These firms are operating in material manufacturing segmentation and
will be analysed on the basis of their financial analysis.
A. Analysing economic environment of Australia with the help of top down analysis
To analyse the financial capabilities of Australia stock exchange is that there will be
effective operational control over the business activities as well as operational practices of the
firm in the given period. The economic environment of Australia will be analysed over various
economic elements such as:
Current interest rate: 1.5%
Current AUD value: 0.76 USD = 1 AUD
Current GDP: 1.2 lacs crores
Inflation rate 1.97%
Business life cycle and current operations
To survive in the highly competitive world, there is need to have appropriate business
operations which in turn will be effective and helpful to have appropriate measurement of
operations (Da Silva and et.al., 2017). However, in relation with such facts, it can be said that
there is need to have administration of the financial stability and internal business objectives of
industries.
BHP Billiton
The genre of the business is that it mainly operates the operations in the material
manufacturing units, has mines operational activities and deal in metal and petroleum products.
It is the world's largest isolated market in capital market economy of Australia. However, in
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relation with the operations of business, it can be said that there are 65000 employees which are
currently working in this business and it has the operating income of more than 11 million USD.
The motive of firm is to expand operational activities of this business on a large level as well as
adding more operational lines into practices.
Adelaide Brighton Ltd.
This firm also deals in minerals but mainly in the cement manufacturing or production
lime, aggregates, etc. It is currently operating in various locations in Australia and has the
appropriate ranking in ASX index. However, the motive of firm is to become the largest seller or
manufacturer of Lime products and cement manufacturing unit in world (Adelaide Brighton Ltd,
2018).
B. Determining financial health of businesses with the help of Bottom up analysis
The determination of profitability, efficiency and financial stability of the firms there will
be appropriate determination of the facts which in turn will be affective and indicative as to have
appropriate revenue generations and gains (Hutchinson, Mack and Verhoeven, 2017). Therefore,
in relation with ascertaining the competencies of both the firms, there is need to conduct a
bottom up analysis on the basis of financial ratio analysis.
Adelaide Brighton
Ltd BHP Billiton Ltd
Particulars Formulas 2016 2017 2016 2017
Liquidity ratios
Current ratio Current Assets 2.32 2.32 1.44 1.85
Current liabilities
Quick ratio
Current assets-
inventories 1.32 1.43 1.09 1.49
Current liabilities
Financial ratio
Long term solvency
ratio
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Solvency ratio
Net income+
Depreciation 1.5 1.62 2.19 2.04
Short + long term
liabilities
Debt to Equity Ratio Total liabilities 0.25 0.34 0.59 0.51
shareholder's equity
Efficiency turnover
ratios
Asset turnover ratio net sales revenue 0.76 0.81 0.25 0.32
Total assets
Profitability ratios
Net profit net profit *100 13.36 11.68 -20.66 15.38
net sales revenue
Gross profit margin Gross profit *100 36.5 35.2 33.5 71.93
Net revenue
ROE Net income *100 15.38 14.78 -10.73 10.56
shareholder's equity
ROA Net income *100 10.17 9.48 -5.24 4.99
Total assets
Market Value ratios
EPS Profit After tax 0.28 0.28 -2.4 2.21
Ordinary shares
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PE ratio
Market value per
share 0.00 23.00 0 20.80
EPS
On the basis of above table, it can be said that both the firms are working on same
segmentation and performing the operational activities of these entities. Therefore, in relation
with such analysis, it can be said that there are influences of various ratios such as profitability,
efficiency, liquidity, short term and long term solvency, etc. Adelaide Brighton Ltd is quite
effective and profitable in comparison with BHP Billiton.
CONCLUSION
On the basis of above report, it can be said that the framework of financial markets is to
bring the accurate details and outcomes among the investors throughout the world. Moreover, in
contrary with analysing the financial stability of Adelaide Brighton Ltd and BHP Billiton on
which Adelaide Brighton Ltd has most preferable outcomes and it will be fruitful for the
investors in terms of making effective investments in the business.
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REFERENCES
Books and Journals
Da Silva, A. S. X. and et.al., 2017. Distribution of Nutrients and Changes in Phytoplankton
Composition in a Tropical Mesotidal Estuary, Northeastern Brazil. Open Journal of
Ecology. 7(07). p.460.
Hutchinson, M., Mack, J. and Verhoeven, P., 2017. Women in leadership: an analysis of the
gender pay gap in ASX‐listed firms. Accounting & Finance. 57(3). pp.789-813.
Online
Adelaide Brighton Ltd. 2018. [Online]. Available through:
<http://financials.morningstar.com/valuation/price-ratio.html?
t=ADBCF&region=usa&culture=en-US>.
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