Corporate Finance Report: Analysis of NAB and BHP Objectives

This report provides a comprehensive financial analysis of National Australia Bank (NAB) and BHP Ltd, focusing on their corporate objectives and financial strategies. The analysis includes an evaluation of wealth maximization versus profit maximization approaches, examining the companies' performance in terms of equity value and profitability. It also delves into the companies' policies on environmental issues, ethical sourcing, employee relations, gender equality, and social responsibility. The report assesses how these non-shareholder maximization goals align with the overall financial objectives of the firms, providing a detailed overview of their sustainability efforts, supplier relationships, employee policies, and social impact initiatives. The findings highlight the importance of balancing financial performance with ethical and social considerations for long-term corporate success. The report references the companies' annual and sustainability reports, providing data-driven insights into their financial and operational strategies.

Running head: CORPORATE FINANCE
Corporate Finance
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Part A...............................................................................................................................................2
Overview..........................................................................................................................................2
Evaluation of Company Objectives.................................................................................................2
Wealth Maximization..................................................................................................................2
Profit Maximisation.....................................................................................................................3
Environmental Issues...................................................................................................................4
Ethical Suppliers..........................................................................................................................5
Employees....................................................................................................................................6
Gender Equality...........................................................................................................................6
Social Responsibility...................................................................................................................7
Key Objectives of Company........................................................................................................8
Profit vs. Wealth Maximization.......................................................................................................8
Part B...............................................................................................................................................9
References......................................................................................................................................11

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Part A
Overview
The companies that were selected for the purpose of financial analysis is the National
Australia Bank and BHP Ltd for the period 2018. The analysis will be done based on the
objectives followed by the company in the view of profit as well as wealth maximisation
approach. While Wealth maximisation is a long-term approach and profit maximisation approach
may be considered as short-term goal for the company it is equally important to balance both for
a sustainable growth in the company. The analysis of the company objectives in terms of
environmental issues addressed, supplier’s policy followed, employee policy, gender diversity
and social responsibility policy followed by company was taken into account (Ioannou &
Serafeim, 2017). The National Bank of Australia is one of the fourth largest bank that is
operating in the banking and financial services industry in Australia. BHP Ltd is the trading
entity of BHP Group Ltd operating as an Anglo-Australian Multinational mining, metal and
petroleum company that is headquartered in Melbourne Australia.
Evaluation of Company Objectives
Wealth Maximization
Wealth maximisation can be well inferred as a modern approach of profit maximisation
wherein the aim of the company is to maximize the value of the equity shareholders thereby
considering the increase in the net worth position and the overall value of the company. A rise in

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the share price of the company from the investment done would be helping the equity
shareholder’s in maximizing the overall net worth (Cho et al., 2015).
National Australia Bank: The reported value for equity by the company in the year 2018 was
around $52,701mn and for the year 2017 the same was around $51,306 million representing an
increase of about 2.72% for the company (Annual Report, 2018).
BHP Ltd: The equity value for the BHP Ltd was around $55,592 million in the year 2018
which was slightly lower than the last year equity value standing at $57,258 representing an
decrease of -2.91%. The equity value or the net worth position of the company has declined
primarily due to the decline in the reserves and retained earnings of the company for the period
2018.
Profit Maximisation
Profit maximisation plays an important perspective when considered from the view point
of company’s operation. Analysis of the profitability for the company can be well assessed with
the help of the reported net income of the company for the period 2018 and 2017.
National Australia Bank: The reported profitability for the company for the period 2018 was
around $5,557 and for the period 2017 it was around $5,288 representing an all-around increase
of about 5.09% for the company in the trend period analysed (Annual Report, 2018). The
increase in the consistent profit can be well referred to the increase in the interest income and the
increased business activity that is undertaken by the company for the trend period analysed.
Profitability of the company can be well viewed with the help of increasing profitability of the
company that is in the form of higher interest income and increasing customer base for the
company that has ultimately lead the company report a higher profitability. On the other hand, it

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was also found that the company has taken various sorts of actions and recommendations for the
purpose of reducing the overall expenses of the company by properly allocating the resources of
the company.
BHP Ltd: The reported profitability by the company for the year 2018 was around $7,744 and
was around $6,694 for the year 2017. The increase in the profitability of the company could be
well analysed as the increase in revenue and decrease in the cost associated with the operations
of the company was well observed for the trend period analysed (Annual Report, 2018). On the
other hand the hand the increase in the profitability of the company has consistently increased for
the company whereby the company has undertaken various sorts of actions and
recommendations for the purpose of increasing the overall profitability of the company. The
consistent rise in the profitability of the company can be well attributed to the increasing revenue
of the company and the associated decreasing operational costs for the company. The company
has also undertaken various financial derivatives instruments in order to stabilize the overall
earnings of the company.
Change in Profitability (%)
Particulars 2018 2017 Change (%)
National Australia Bank 5557 5288 5.09%
BHP Ltd 7744 6694 15.69%
Environmental Issues
Environmental Concerns are some of the important components that the companies
undertake while they undergo various actions and business operations they undertake. Reducing
carbon emissions, responding to climate change, water usage, waste reduction are some of the

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important concerns that the companies undertakes as an initiative for the environmental policy
developed (del Mar Alonso-Almeida et al., 2015).
National Australia Bank: The environmental policy followed by the company is such whereby
the environmental group targets for the company has been to reduce the Science-based GHG
Emissions by around 21% till the year 2025. Energy Usage reduction by around 5% till the year
2020, reducing the paper office tones by around 10% till the year 2020 (Sustainability Report,
2018). Reducing the water consumption by around 10% till the year 2020 are some of the
important concerns that the company has addressed in the environmental policy of the company.
BHP Ltd: Managing and minimizing the impact of the climatic changes that were observed in
the form of green-house gas emissions, building resilience of our portfolio for climate change
risks and working to build operational, community and ecosystem resilience are some of the key
steps and approaches that are followed by the company in the due course of their operations
(Junior, Best & Cotter, 2014).
Ethical Suppliers
Supplier is one such important stakeholders that allows the operations of the company in
a smooth way with the help of the delivery of the raw materials and goods that would be required
or desired by the company in the due course of their operations.
National Australia Bank: It was assessed that almost 90% of the suppliers of the company
comply with the Global Supplier Sustainability Principle that is applicable for the suppliers of
the company and suppliers that are reassessed or re-contracted are almost assessed on various
ground s including the Environmental, Social and Governance Risks (ESG) risks each year
(Sustainability Report, 2018).

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BHP Ltd: The policy followed by company with respect to the supporting the requirement of the
business is well managed by the company with the help of the supplies that are locally sourced
with the help of local suppliers that help benefit the local suppliers of the economy. It is also
expected that that the local suppliers well endorse the company policies in regard to supply of
goods and other transactions that would be associated with the result of transaction done.
Employees
The employees of the company represent an important stakeholder for the company
representing an important group of the various stakeholder that the company has in the due
course of operations (Amran, Lee & Devi, 2014). There are various policies, actions and
initiatives that are taken by the company with respect to following the employee policy
applicable for the operations of the company.
National Australia Bank: Recognizing the efforts of the employee and taking several similar
initiatives in the field of promoting the desired course of effort applied is well taken into
consideration by the company. The policy of the company that it allows every employee of the
company to take part in charity functions and social activities in order to promote the social
events.
BHP Ltd: Giving the employee of the company a safe and a healthy environment is the key aim
that the company aims at the providing to the employee of the company for better development
and prosperity of the company. Promoting a diverse and inclusive culture with the employee
base of the company is the key employee policy that is followed by the company. Culture
Building along with trust and relationship among the employee of the company is also some of
the key concern that the company has followed.

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Gender Equality
The gender equality can be well observed with the help of diversity in the employee base
where both female and male workers are given an equal opportunity for growing and
development within the organisations.
National Australia Bank: The Company has given equal set of opportunity for all the
employees of the company irrespective of their gender and religion. The company also has an
objective of having around 40-60% of either gender at the various level of operations of the
company by the year 2020 (Fernandez‐Feijoo, Romero & Ruiz‐Blanco, 2014).
BHP Ltd: The BHP Ltd has an aspirational goal of having an equal gender distribution at the
various level of working of the organisation by the year 2025. The women workforce currently
represent around 22.4% of the total workforce that the company intends to increase within the
defined time horizon to have an equal gender balance (Sustainability Report, 2018).
Social Responsibility
Social Responsibilities can be well taken by companies in the field environmental
sustainability initiatives taken as well as efforts taken involving ethical business practices and
economic responsibility that is well aligned with the overall benefits flowing to the economy and
organization as a whole.
National Australia Bank: Increasing the initiatives taken by the company in the field of social
activities such as supporting the charity organization and NGO’s that operates are some of the
key social responsibilities taken by the company for the purpose of increasing their social
responsibilities actions.

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BHP Ltd: The BHP has an informal set of having relationships that exist between the global,
regional and local stakeholders of the company. Investment activities in the field of various
business responsibilities, business activity and other economic activities were a well part of the
social policies of the company.
Vision and Objectives
National Australia Bank: The National Bank of Australia key objectives are having a positive
Net Promoter Score, having a cost to income ratio towards 35%, having the most efficient return
on equity in the Australian Banking Sector and having a top quartile employee arrangement.
BHP Billiton: The BHP Billiton is to create long-term value for the shareholders of the company
with the help of various discovery, acquisition, development and marketing of the natural
resources of the company.
Profit vs. Wealth Maximization
Wealth maximization can be well referred to the increase in the equity shares of the
company with the changes or the increase in the stock price of the company. The increase can be
in the form of positive business outlook, futuristic business growth rate of the company,
increasing the dividend value and meeting the expectations of the stakeholders of the company
are some of the key component of wealth maximization approach. It is often considered that
enhancing the value of the stakeholders is the superior goal of the business and the management
needs to adopt the same in order to maintain the interest of the shareholders in the business
(Sharfman, 2014). Policies and actions taken by the National Australian Bank and BHP Billiton
ltd were taken into analysis. As per the analysis of the business of BHP Ltd, the management of
the company is trying to enhance the profits of the business and also achieve growth in the

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operations of the business (Ng & Rezaee, 2015). There are various factors and options that the
management of the company is considering for the purpose of increasing the overall equity value
of the company. Therefore, the management of the company does not follow fully wealth
maximization policy and it is clear that the same does not reconcile with the objectives of the
shareholders which is due to the fact that the management of the company is following profit
maximization policy. However it is equally important to note that in the case of National
Australian Bank, the management of the company is trying to enhance the value of the
shareholders by offering better dividends to the shareholders and the management takes all
efforts for creation of long term value for the shareholders (Smith & Rönnegard, 2016).
Part B
1) The present value of the cash flows from Investment A was around $12,092 and from
Investment B it was around $10,652.59 that was calculated with the help of 10% discount
rate.
2) The future value of the cash flows from Investment A was around $21,421 and from
Investment B it was around $18,871 that was calculated with the help of 10% discount
rate.
3) The present value of cash flows from “Investment A is considerably much larger than
Investment B due to the timing and the size of cash flows that is typically associated with
the project. Under the case of Investment A cash flows that composed of a significant
weightage were received in the initial set of years allowing the investor to invest in other
investment at the prevailing 10% interest rate (Patrick & French, 2016).

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4) The present value of the cash flows to an equivalent annual amount was around
$3,189.87 for Investment A on the other hand, the same was around $2,810.13 for the
Investment B.
5) The present value of the cash flows from 'Investment A' are equivalent to the annual cash
flows where if you invested the present value of the cash flows in a bank account at 10
per cent interest, that you could extract the same yearly cash flows as 'Investment A' and
demonstrate this quantitatively as follows:
Proof of PV Meaning for Investment A 1 2 3 4 5
Opening Balance (PV G7) $4,545.45 $3,305.79 $2,253.94 $1,366.03 $620.92
Interest at 10% $454.55 $694.21 $746.06 $633.97 $379.08
Available Balance $5,000.00 $4,000.00 $3,000.00 $2,000.00 $1,000.00
Withdrawal -5000 -4000 -3000 -2000 -1000
Closing Balance $0.00 $0.00 $0.00 $0.00 $0.00
6) Interest Rate or the required rate of return plays an important role when considering the
assessment or financial viability of the project. The financial viability of the project for
the investment can be well addressed with the help of the required rate of return that
represent the return compensation that the investors requires for the purpose of taking
risks involved with the investment. The applicable interest rate or the required rate of
return also serves as a compensation to the investors for the purpose of compensating the
investor based on the current sacrifice made by investors (Bolek, 2014).

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References
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corporate social responsibility toward sustainability reporting quality. Business Strategy
and the Environment, 23(4), 217-235.
Annual Report (2018). Bhp.com. Retrieved 19 August 2019, from
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/
bhpannualreport2018.pdf
Annual Report (2018). Capital.nab.com.au. Retrieved 19 August 2019, from
https://capital.nab.com.au/docs/2018_NAB_Annual_Financial_Report.pdf
Bolek, M. (2014). Return on current assets, working capital and required rate of return on
equity. e-Finanse: Financial Internet Quarterly, 10(2), 1-10.
Bora, B. (2015). Comparison between net present value and internal rate of return. International
journal of research in finance and marketing, 5(12), 61-71.
Cho, C. H., Laine, M., Roberts, R. W., & Rodrigue, M. (2015). Organized hypocrisy,
organizational façades, and sustainability reporting. Accounting, Organizations and
Society, 40, 78-94.
del Mar Alonso-Almeida, M., Marimon, F., Casani, F., & Rodriguez-Pomeda, J. (2015).
Diffusion of sustainability reporting in universities: current situation and future
perspectives. Journal of cleaner production, 106, 144-154.