BSBFIM601: Financial Planning and Resource Management Report

This report provides a comprehensive analysis of financial management principles, using BHP Group Limited as a case study. It begins with a review and analysis of the company's financial data, including income statements and cash flow statements from 2014 to 2018, to assess its financial performance and identify trends. The report delves into the reasons behind the company's profitability and losses, highlighting the impact of efficient operations and revenue fluctuations. It also examines the company's business plan, focusing on critical dates and resource generation. Furthermore, the report covers cash flow trends, statutory compliance requirements, and the suitability of existing financial management software. It includes resource allocation strategies, budget preparation, risk management, profit and loss statement reviews, and budget revisions to address contingencies. The report concludes with an evaluation of financial management effectiveness and provides insights into key financial aspects, such as revenue, operating costs, and net profit.

Running head: MANAGE FINANCES
Manage Finances
Name of the Student:
Name of the University:
Authors Note:

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MANAGE FINANCES
Contents
Introduction:....................................................................................................................................2
Review and analysis of previous financial data:..............................................................................2
Reasons behind generation of previous profit or incurring loss:.....................................................5
Business plan review to establish dates critical to resource generation for the company:..............5
Analysis of cash flow trends:...........................................................................................................5
Statutory compliance requirements and liabilities for taxation:......................................................8
Existing software suitable for financial management of the company:...........................................9
Allocation of resources using previous financial data:....................................................................9
Estimates of new items for inclusion in the budget:......................................................................10
Preparation of budget:....................................................................................................................10
Managers and supervisors should be clear about the budget:........................................................12
Risk management to ensure no opportunities for misappropriation of fund:................................12
Profit and loss statement review:...................................................................................................12
Budget revision to deal with contingencies:..................................................................................15
Due diligence compliance:............................................................................................................15
Identification of significant issues in the financial statements:.....................................................15
Evaluation of financial management effectiveness:......................................................................16
Conclusion:....................................................................................................................................16
References:....................................................................................................................................17

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MANAGE FINANCES
Introduction:
BHP Group Limited is an Australian based multi-national company involved in mining of
minerals, metals and petroleum in all across the globe. Founded in 1885 the company has a long
and fruitful journey to be world’s largest mining company at the present. Along with the
evolution of financial statements of the company over the years to assess the financial
performance of the company this document also explains the importance of budgeting in
financial management of the organization.
Review and analysis of previous financial data:
In order to review and analyze the previous financial data of the company it is important to have
the financial statements of the company from the past. The financial information of the company
has been obtained from the annual reports of the company to accumulate the financial data from
the past in one place to analyze the past financial data of the company properly. The table below
contains the financial information related to the performance of the company over the last five
years (Welch-Devine, 2017).
INCOME STATEMENT of BHP Billiton Limited
Amounts denominated in US$' millions 2014-06 2015-06 2016-06 2017-06 2018-06
Gross revenue 67,206.
00
44,636.
00
30,912.
00
38,285.
00
43,638.
00
Less: Cost of revenue 32,086.
00
24,057.
00
18,721.
00
17,016.
00
17,204.
00
(A): Gross profit earned 35,120. 20,579. 12,191. 21,269. 26,434.

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00 00 00 00 00
Less: Operating costs and expenses
R&D expenses 43.
00
13.
00
Administrative and general expenses 7,662.
00
5,607.
00
4,230.
00
4,256.
00
4,411.
00
Interest and other expenses 617.
00
418.
00
848.
00
1,018.
00
1,029.
00
Operating expenses (Others) 4,562.
00
6,485.
00
14,372.
00
5,673.
00
6,243.
00
(B): Total operating costs and expenses 12,884.
00
12,523.
00
19,450.
00
10,947.
00
11,683.
00
Earnings before provision for taxation
(A -B)
22,236.
00
8,056.
00
(7,259.0
0)
10,322.
00
14,751.
00
Less: Provision for taxation 7,012.
00
3,666.
00
(1,052.0
0)
4,100.
00
7,007.
00
Earnings after tax 15,224.
00
4,390.
00
(6,207.0
0)
6,222.
00
7,744.
00
Net income from discontinuing ops (1,512.0 (2,921.0

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0) 0)
Other (1,392.0
0)
(968.0
0)
(178.0
0)
(332.
00)
(1,118.0
0)
Net profit 13,832.
00
1,910.
00
(6,385.0
0)
5,890.
00
3,705.
00
Earnings available to equity
shareholders
13,832.
00
1,910.
00
(6,385.0
0)
5,890.
00
3,705.
00
Earnings per share (EPS)
Basic 2.
60
0.
35
(1.
20)
1.
10
0.
69
The above data shows that the performance of the company has fluctuated over the last five
years, i.e. period considered for the analysis. In fact the fluctuation has been mostly negative
with revenues as well as profits figures of the company have gone down in recent years as
compared to the revenue and profit figures for the financial year ending on 30th June, 2014 and
30th June, 2015. In 2014 the company generated a gross revenue of $67,206 million and $13,832
million as net profit after tax in the year. Subsequent to 2014 however, the both revenue and
profit of the company have declined significantly in last four years. The gross revenue of the
company stoop as low as $30,912 million in 2016 however, in 2018 the company has generated a
revenue of $43,638 million. The company even incurred a loss of $6,385 million in 2016 shows
that the performance of the company has taken a beating in recent years.

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Reasons behind generation of previous profit or incurring loss:
The main reason behind the company generating significant revenue and resultant profit over the
years is mainly due to its ability to conduct its operating activities efficiently. The company has
its business operations spread to different parts of the world and this has helped the company to
generate significant revenue in the past and earn operating profits from its business operations. In
recent past the company incurred loss only in 2016 and the primary reason behind the loss is the
huge decline in the amount of revenue the company generated in 2016 (Sinason, 2017).
Business plan review to establish dates critical to resource generation for the company:
The business plan of the company for the last decade and more is mainly revolve around the
strategy to expand the operations of the company. In 2001 the merger of BHP with Australian
Broken Hill Proprietary Company Limited is one of the most important date in the history of the
company as it helped the company to expand its operations.
Analysis of cash flow trends:
In order to analyze the cash flows trends firstly, it is important to have the cash flow statements
of the company over the years. The statement below shows the amount of cash flows under
different activities over the years.
Cash flow of BHP GROUP LTD
Amounts are denominated in
US$' millions
2014-06 2015-06 2016-06 2017-06 2018-06
Operating activities cash flows:
Depreciation expenses 8,701. 9,158. 8,661. 7,719. 6,288.

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00 00 00 00 00
Impairment charges 797
.00
828
.00
210
.00
188
.00
333.
00
Compensation on stock 247
.00
247
.00
Changes in inventory (54
.00)
151
.00
527
.00
(679
.00)
(182.
00)
Changes in other working capital 205
.00
(338.
00)
(320
.00)
327
.00
64
.00
Other non-cash items 15,468.
00
9,250.
00
1,547.
00
9,249.
00
11,958.
00
Net cash provided by operating
activities
25,364.
00
19,296.
00
10,625.
00
16,804.
00
18,461.
00
Investing activities cash flow:
Acquisitions, net 768
.00
185
.00
206
.00
(48
.00)
204.
00
Investment purchases (1,193.
00)
(15
.00)
Investment in maturities and sales 956 445

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.00 .00
Intangible purchases (192.
00)
(98
.00)
Sale proceeds from intangibles 8
.00
Investment made (Others) (294.
00)
(1,212.
00)
(505
.00)
139
.00
(1,146.
00)
Net cash used for investing
activities
(15,834.
00)
(12,568.
00)
(7,245.
00)
(4,161.
00)
(5,921.
00)
Financing activities cash flow:
Issue of debt 6,288.
00
3,440.
00
7,395.
00
1,613.
00
528.
00
repayment of debt (7,198.
00)
(4,168.
00)
(2,788.
00)
(7,120.
00)
(4,406.
00)
Issue of equity shares 14
.00
9
.00
Payment of cash dividend (6,387.
00)
(6,498.
00)
(4,130.
00)
(2,921.
00)
(5,220.
00)
Other financing activities 815 (1,059. (193 (705 (1,793.

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MANAGE FINANCES
.00 00) .00) .00) 00)
Net cash provided by (used for)
financing activities
(6,468.
00)
(8,276.
00)
284
.00
(9,133.
00)
(10,891.
00)
It is clear from the cash flow statement that the company is continuously generating positive cash
flows from operating activities over the years. However, the trend is clear that unlike 2013-14
the ability of the company to generate positive cash flow from operating activities have declined
significantly. In 2014 the company generated $25,364 million whereas the same reduced to
$10,625 million in 2016. In last two years however, the ability of the company to generate cash
inflows from operating activities have increased as compared to 2016. The extent of investment
have also declined recently as can be seen from the above cash flow statement. The financial
activities shown increase amount of outflow due to repayment of loan and payment of dividend.
Statutory compliance requirements and liabilities for taxation:
The company operates in number of different countries and have its mining activities spread to
different parts of the world. Thus, the company is liable to pay tax to the respective governments
of different countries where it operates on the amount of profit it earned from operations in these
regions. In Australia, the company is under obligation to comply with the provisions of
Corporations Act, 2001 and the Income Tax Assessment Act 1997.

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Existing software suitable for financial management of the company:
The company currently has a specific software built and developed specifically for the company
that it uses to manage the financial resources of the company. Considering the size of the
company there is no software readily available in the market to be used for financial
management of the company.
Allocation of resources using previous financial data:
Allocation of resources in different activities of the company is outlined in the statement below:
% of total investments
Property, plant and euipment
(PPE)
40%
Investment purchases 25%
Investment in maturities and
sales
15%
Intangible purchases 10%
Investment made (Others) 10%
% of total financing
budget
repayment of debt 60%
Payment of cash dividend 25%

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Other financing activities 15%
Estimates of new items for inclusion in the budget:
Apart from the existing items the company should specifically include the amount to be kept
aside for expansion of facilities in different parts of the globe to ensure that the expansion
continues in the future (Ptashchenko & Velykozhon, 2018).
Preparation of budget:
The performance budget of the company is provided below:
INCOME STATEMENT of BHP Billiton Limited
Amounts denominated in US$'
millions
2014-06 2015-06 2016-06 2017-06 2018-06
Gross revenue 48,001
.80
52,801.
98
58,082.
18
63,890.
40
70,279.
44
Less: Cost of revenue 18,924
.40
20,816.
84
22,898.
52
25,188.
38
27,707.
21
(A): Gross profit earned 29,077
.40
31,985.
14
35,183.
65
38,702.
02
42,572.
22
Less: Operating costs and expenses
R&D expenses 4 52 57 62 69