MBA403 Wealth Report: BHP Billiton Investment Suitability Analysis

This report provides a financial and economic interpretation of BHP Billiton's 2017 annual report, created for prospective shareholders. It assesses the company's investment suitability by analyzing financial and non-financial information, including ratio analysis and industry trends. The report highlights improvements in net profit and turnover compared to 2016, but also notes concerns about cash flow and earnings per share. It considers the impact of Australian mining regulations and competitor performance. The analysis concludes with a recommendation for long-term investment potential despite current market challenges, advising investors to consider the company's future growth prospects. Desklib offers a wide range of study resources, including solved assignments and past papers, to support students in their academic endeavors.

Financial and Economic Interpretation and
Communication
Wealth Report
6/6/2018
BHP Billiton
Student’s Name

Executive summary:
Financial and non financial information of an organization are important for an investor to
measure the overall position of the company. It leads to the investors towards a decision that whether
the investment position of an organization is good or not. In the report, BHP Billiton has been taken
into the context to measure the investment position and the various factors which could impact on the
overall investment position of the company. The ratio analysis study has been conducted on BHP
Billiton as well as the industrial and economical position has also been gathered o measure the overall
position of the company.
Analysis:
Annual report (2017) of BHP Billiton explains that the overall financial and non financial
position of the company has been increased in context with the last year. The performance of the
company explains that the overall turnover as well as the net profit level of the company has been
improved because of new diversification policies of the company. The company has entered into the
new markets due to which the economical impact has been lower and it has affected positively on the
overall position of BHP Billiton. The net profit level of the company was -85.94% in 2016 which has
been increased to 10.45%. Further, it has also been evaluated that the short term debt obligation of the
company has been enhanced and explains that the current assets of the company has been improved in
context with the current liabilities of the company.
It has also been measured on the basis of the study on the financial statement of the company
that the cash flow statement of the company explains that the overall cash position of the company has
been lowered. In addition, the market level of the company has also been evaluate and it has been
recognized that the earnings per share of the company has been lowered much from last year due to
the changes into the net profitability level and the total number of outstanding shares of the company.
Current Financial information of BHP Billiton
Net profit
liquidity
leverage Cash position EPS
2017 2016 2017 2016 2017 2016 2017 2016
$ m $ m
-85.94% 10.45% 3.07 3.81 -74.00 173 -8.76 -4.04
(Morningstar, 2018)
On the basis of the evaluation, it has been recognized that the huge changes have come into the
position of the company. The changes have taken place because of economical and industrial position.
Interpretation:
Annual report (2017) of BHP explains that the financial position of the company has been
improved. The net profitability level of the company has been better due to the higher turnover from
the last year as well as lower increment rate in the overheads of the company. Further, it has been
measured that the overall position of the company has been increased. The current asset level has been
lowered by the company in 2017 which has impacted on the liquidity position of the company has
been lowered. The changes have been done by the company to reduce the working capital requirement
of the company. It has also been measured that the current cash position of the company explains
about higher cash outflow than the cash inflow of the company. These changes have occurred into the
cash flow statement of the company due to the share buyback and other expenditure of the company.
The marketing position of the company has also been measured and it has been found that the
earnings per share of the company was negative in last year and currently, the position has been more
lowered. It explains that the overall position of the company is not better and explains that the
investors could lose the interest in the company (Yahoo Finance, 2018). It has also been measured

that the overall position of the company is not at all good in terms of market and the changes into the
stock price of the company.
In addition, the study has been done on the economical position of Australia and it has been
found that the overall position of the country is better. Few changes have arrived years back due to the
financial crisis but the country has managed to recover from that (Australia economic, 2018).
Currently, few mining regulations have impacted on the mining industry which has lead to the
company towards few losses. Yahoo finance (2018) explains that the profitability position and the
stock price of the company have also been affected due to the new changes into the mining rules.
Further, it has also been found that the main competitor of the company, RIO TINTO has also faced
few losses due to the changes into the economical and industry position of the company (Focus
mining, 2018).
The main business of the company is mining the metals and Petroleum Company. The
financial performance of the company has been improved in Australian market itself. The target
market of the company is the business (Home, 2018). It directly does business to business marketing.
The forecasting trend of the company explains that the financial position of the company would be
improved in near future. The remuneration level of the company has been almost similar from last
year. Few changes have only occurred into the remuneration and the highest earner of the company is
its CEO (Annual report, 2017). The management team has been hired on the basis of the
qualifications and the experiences. The management team of the company is quite competitive. The
company has offered various non-wage-related benefits to the employees of the company.
Conclusion:
The study recommends to the shareholders of the company that the market position of the
company has been lowered due to which the company would not be able to give higher returns to the
investors of the company. On the basis of the study, it has been recognized that the overall non
financial and financial performance of the company would be better in near future and thus the long
term investment into the company would offer huge return.
References list:
Annual Report. 2017. BHP Billiton. (online). Available at:
https://www.bhp.com/-/media/documents/investors/annual-reports/2017/bhpannualreport2017.pdf
(accessed 9/6/18).
Australia Mining. 2018. Mining industry trends. (online). Available at:
https://www.australianmining.com.au/news/top-mining-trends-2018/ (accessed 9/6/18).
Focus economics. 2018. Australia economic outlook. (online). Available at: https://www.focus-
economics.com/countries/australia (accessed 9/6/18).
Home. 2018. BHP Billiton. (online). Available at: https://www.bhp.com/ (accessed 9/6/18).
Morningstar. 2018. BHP Billiton. (online). Available at:
http://financials.morningstar.com/balance-sheet/bs.html?t=BHP&region=usa&culture=en-US
(accessed 9/6/18).