BHP Billiton: Financial Performance Analysis and Insights Report

This report provides a financial analysis of the BHP Billiton group, focusing on the evaluation of its performance through various financial ratios. The analysis includes the calculation and interpretation of leverage, efficiency, liquidity, and profitability ratios for the years 2018 and 2019. The report assesses the company's financial position and performance, considering the perspectives of different stakeholders, including investors and employees. It highlights the improvements in profitability, such as the increase in return on assets and net profit margin. The report also discusses the merits and demerits of using financial ratios as a tool for financial analysis, comparing data over a period of time and identifying trends. The conclusion summarizes the positive performance of the company and the effectiveness of the financial ratios in the evaluation process.

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Finance Insights and Business
Intelligence

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Table of Contents
Introduction................................................................................................................................3
1..................................................................................................................................................3
2..................................................................................................................................................4
3..................................................................................................................................................4
Conclusion..................................................................................................................................5
References..................................................................................................................................6
Appendix....................................................................................................................................7

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Introduction
Financial analysis is required to be performed to evaluate the performance of the business and
in the given case the same will be done in the context of the BHP Billiton group. In this, the
ratios will be calculated and then the analysis will be made on that basis. There will be the
determination of the position and performance of the company with that. The advantages and
disadvantages in relation to ratios will also be identified and discussed.
1.
The ratio is the technique that will be used and in that the comparison will be made possible.
The calculations which are required to be performed are made and shown below for better
understanding.
Leverage ratios:
Particulars Formula 201
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2019
Debt to asset ratio Total debt/total assets 0.46 0.49
Asset to equity
ratio
Total assets/total equity 1.85 1.95
Efficiency ratios:
Particulars Formula 2018 2019
Account receivable turnover ratios Net sales/total Account receivable 13.9
3
12.79
Asset turnover ratios Net sales/total assets 0.39 0.44
Liquidity ratios:
Particulars Formula 2018 2019
Current
ratios
Current assets/current liabilities 2.51 1.89
Quick ratio Quick assets/current liabilities 2.24 1.58
Profitability ratios:
Particulars Formula 2018 2019
Return on assets Net profit/Total
assets*100
6.91% 9.44%

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Net profit margin Net profit/sales*100 17.96% 21.50%
2.
The business carries various operations and there are several stakeholders in the company
who invest their efforts and money in the business. Due to this, they expect a certain return
for them and this will be provided to them in various manners such as dividends. This will be
made possible only when the performance and position of the company are maintained in an
effective manner (Ongore and Kusa, 2013). This is ascertained by the ratios which are
determined and by that all will be evaluated.
There is the requirement for investment and for that investors are the main stakeholders of the
company. They make the investment in the company by which all the operations are carried.
This will help the company in making the earnings and by that, the investors will be
benefitted and due to that, they are interested in the company’s position (Nirajini and Priya,
2013). This is identified with the help of ratios which are calculated in the above part. The
leverage ratios are maintained in the company and it can be noted that they are appropriate
and at this level, there will be various benefits that will be attained by the investors. The
profitability of the company is improving from the last year and there is an increase in return
on asset and net profit margin. The rise was made from 6.91% in 2018 to 9.44% in 2019
(BHP Billiton group, 2019). The net profit has also increased as the same was 17.96% in
2018 but 21.50% in 2019. This means that the earnings of the company have grown and that
will be beneficial for the company as well as investors. Therefore it can be said that the
company is in a satisfactory position from an investor’s viewpoint.
Another group of stakeholders includes employees and they carry all the activities in the
business. They are the ones who have various interests in the business and they are required
to be considered. For this, the solvency of the business shall be considered as by that the job
security is linked (Waworuntu, Wantah and Rusmanto, 2014). The leverage position is
adequate and the debt position is appropriate. The liquidity will also be considered in this
process and it can be noted that current and quick ratios have been maintained at the proper
level. The employees will be having a positive perspective due to this position.

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3.
The business analysis has been made and for that ratios have been used and calculations have
been made for the same. This technique is used and by this, there will be merits as well as
demerits which will be faced by the company and all of them are presented hereunder.
Merits:
1. There is the use of information in the ratio calculation and by that the data is compared
with one another (Crowder, D.W. and Reganold, J.P., 2015). This helps in evaluating the
position over a period of time.
2. The calculations which are made help in identifying the trends that are followed in the
business.
Demerits:
1. The making of the financial statements is made in a different way by all the entities. This
acts as a restriction in the process of making an evaluation.
2. The understanding of the financial statements is a difficult matter and it is not acceptable
for all and makes it complicated.
3. There is the use of the past data and also the assumptions are made which are not proved
and so it cannot be considered as reliable.
Conclusion
From the report that is presented, it can be concluded that there is a positive performance that
is maintained by the BHP Billiton group. There is the use of the financial statements and by
the help of that ratios have been calculated. They have been used for the evaluation purpose
and the advantages and disadvantages which are related to ratios.

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References
BHP Billiton group. (2019) Annual report. [Online] Available at:
https://www.bhp.com/-/media/documents/investors/annual-reports/2019/
bhpannualreport2019.pdf [Accessed 22 January 2020]
Crowder, D.W. and Reganold, J.P. (2015) Financial competitiveness of organic agriculture
on a global scale. Proceedings of the National Academy of Sciences, 112(24), pp.7611-7616.
Nirajini, A. and Priya, K.B. (2013) Impact of capital structure on the financial performance of
the listed trading companies in Sri Lanka. International Journal of Scientific and Research
Publications, 3(5), pp.1-9.
Ongore, V.O. and Kusa, G.B. (2013) Determinants of financial performance of commercial
banks in Kenya. International journal of economics and financial issues, 3(1), pp.237-252.
Waworuntu, S.R., Wantah, M.D. and Rusmanto, T. (2014) CSR and financial performance
analysis: evidence from top ASEAN listed companies. Procedia-Social and Behavioral
Sciences, 164, pp.493-500.

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Appendix
Income statement:

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Balance sheet: