Appendix Finance
Transcript of Appendix Finance
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Introduction:
This article illustrates about BHP Billiton group. The BHP Billiton group is the world's
largest mining company. It is also the largest company in Australia by market capitalisation.
It was created in 2001 by the merger of Australia's Broken Hill Proprietary Company (BHP)
and the British-Dutch Billiton. The result is a dual-listed company with head offices in
Melbourne and London. BHP Billiton Limited, which is the majority partner in the dual-
listed structure, is listed on the Australian Securities Exchange. BHP Billiton Plc is listed on
the London Stock Exchange and is a constituent of the FTSE 100 Index. BHP Billiton
Limited and BHP Billiton Plc continue to exist as separate companies, but operate on a
combined basis as BHP Billiton. The headquarters of BHP Billiton Limited, and the global
headquarters of the combined BHP Billiton Group, are located in Melbourne, Australia. BHP
Billiton Plc is located in London, United Kingdom. Both companies have identical boards of
directors and are run by a unified management team. Shareholders in each company have
equivalent economic and voting rights in the BHP Billiton Group as a whole. (BHP Billiton,
2010).
The course work bears a significant importance as it enables a student to become familiar
with the practical business operations. The students under course work get the chance to close
to the people of the real business world and to be familiar within and outer environment of
how an enterprise works in the real business world. Thus it enables a student to develop his
analytical skill and scholastic aptitude. As a student of APDMS of Icon College of
Technology and Management, UK, I took initiative to do my course work under Mining
industry.
1.1 Origin of the Report:
This report is prepared as partial requirement of my course work for the APDMS students of
Icon College of Technology and Management, UK. This study will give me an opportunity to
gather experience how the Financial Management practices is actually operated in an
organization. In order to achieve this objective I have chosen BHP Billiton Group. Basically,
the Purpose of this report is to evaluate the companys performance by doing comparison
with a close competitor and its industry average, non-financial performance of the company.
Furthermore, there are been discussed various investment appraisal method, advantages and
disadvantages of each method and its resources. Information has taken from companys
website, internal papers and different finance related books and websites.
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1.2 Objectives:
The result of a study depends upon the proper selection of the objectives. Before starting, it is
essential to set up the objectives and then arrange the total procedures according to the
objectives. I have some objectives about preparing the report.
Broad Objective:
The major objective of the report is to fulfil the requirement of my course work and achieving
academic and practical knowledge, how organizations are managed in real life situation
which I can apply in my future life.
.
Specific Objective:
y To know the historical background of the organization including its mission,objectives and strategies.
y To briefly analyze on the financial practices of BHP Billiton Group.y To the use of financial tools, how effectively developing their services as well as
satisfy customer.
1.3 Methodology:
Sources of data
It is very difficult to collect relevant data from a person other than the regular employees of
the organization because information relating to my topic is restricted to be disclosed without
the approval of the appropriate authority. Thats why I face some problem to prepare this
report.
Primary Sources:
1) Practical desk work.
II) Face to face conversation with the officers.
III) Direct observations.
V) Daily note taken during the course period.
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Secondary Sources:
I) Annual reports of BHP Billiton Group.
II) Various books related with the subject.
III) Web sites of BHP Billiton Group.
IV) From Different Files.
V) Half yearly reports of BHP Billiton Group.
1.4 Scope of the Study:
This course work gives me a great scope or opportunity for gather experience and knowledge
in Mining areas by which I can evaluate or expose myself. As my report topic is mainly
focused on Financial Performance, so here I tried to collect how they practice financial tools.
1.5 Limitations:
Nothing is ahead of limitations. The major limitations that I faced during my course work
period are as follows:
y The main constraint of the study was inadequate access to information.y As the officials were busy with their own duty, they could give me little time for the
consultation.
y Time constraint is another important limitation of the report.
2.0 Companys financial performance
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What is Ratio Analysis?
The financial statement analysis in which the numerical relationship between two financial
figures of a financial statement is determined is called ratio analysis. In financial statement
analysis, a number of ratios are commonly used in assessing the financial position &
operating performance of the firm.
Key points of Ratios Analysis
y Ratios can be classified into the following four types:
1) Liquidity Ratios measure a firms ability to meet maturing short-term obligations.
Current ratio
Quick (or acid test) ratio
2) Leverage/Finance Ratios measure the extent to which a firm has been financed by debt.
Debt-to-total-assets ratio
Debt-to-equity ratio
Long-term debt-to-equity ratio
3) Activity Ratios measure how effectively a firm is using its resources.
Inventory turnover
Fixed assets turnover
Total assets turnover
Account receivable turnover
Average collection period
4)Profitability Ratios measure managements overall effectiveness as shown by the returns
generated on sales & investment
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Gross profit margi
Operati g profit margi
Net profit margi
Ret rn on total assets (ROA)
Ret rn on stockhol ers equit (ROE)
Earnings per share (EPS)
Price-earnings ratios
1. Li i i Rati
Current Rati
2007 2008 2009
1.08:1 1. 1:1 1.9:1
(Please see appendi -1)
Fi
ure-1: Current Rati
ofBH
BLL
T
N
Comments: In year 2007 ratio was 1 to 1.08, in 2008 it was 1 to 1. 1 and in 2009 the ratio
was 1 to 1.9. The ratio is growing gradually every year and this is having more than one.This
increase means that companys current asset is more than current liabilities and it indicates
companys good position.
Qui kRatio/ i Test Ratio
0
0.5
1
1.5
2
2007 2008 2009
1.08
1.31
1.9
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2007 2008 2009
0.76 1.01 1. 9
(Please see appendi -2)
Fiure-2: Qui
kRatio ofBH
B
LL
T
N
Comments: Here the quick ratio ofBHP BILLITON is increasing gradually every year
because of each yearthe currentliabilities changes.
WorkingCapital to Net Assets Ratio
2007 2008 2009
2.8% 1 . 2% 26.65%
(Please see appendi - )
Figure-3: WorkingCapital to Net Assets Ratio ofBH
BLL
T
N
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2007 2008 2009
0.76
1.01
1.49
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
2007 2008 2009
2.80%
13.32%
26.65%
Ratio
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Comments: For every 100 the company worth is increasing gradually every year.
2. Leverage/Finance Ratio:
Debt-to-total-assets ratio
2007 2008 2009
0.48:1 0.49:1 0.48:1
(Please see appendix-4)
Figure-4:Debt-to-Total-Assets Ratio of B
P BILLITO
Comments: The relationship between debt and total assets is not very high. It is bellow 1
(one). That is well.
Debt to- Equity Ratio
2007 2008 2009
0.95:1 0.96 0.9 5
(Please see appendix-5)
0.
0.
0.
0.
0.
0.
0.
0.
0.
0.
007 2008 2009
Rati
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Figure-5: Debt-to-Euity Ratio ofBH
!B
"LL
"T
#N
Comments: The relationship between debt and owners capitalis not very high. Itis bellow 1
(one). Thatis well.
Long-Term Debt E uity Ratio2007 2008 2009
0.60:1 0.5 :1 0.65:1
(Please see appendi -6)
Figure-6: Long-Term Debt-to-E$uity Ratio ofBH
%B
&LL
&T
'N
Comments: The relationship between debt and owners capitalis not very high. Itis bellow 1
(one). Thatis well;itis very wellin the year 2008.
3. Acti ity Ratio:
Inventory Turnover Ratio2007 2008 2009
0.95
0.96
0.95
0.944
0.9460.948
0.95
0.952
0.954
0.956
0.958
0.96
0.962
2007 2008 2009
Ratio
0
0.2
0.4
0.6
0.8
20072008 2009
0.60.53
0.65
Ratio
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1 :1 11:1 10:1
(Please see appendi -7)
Figure-7: Inventory Turnover Ratio ofBH(
BILLIT)
N
Comments: Inventory turnover has great capacity to maintain their sales. Within years
theirinventory turnover was high in 2007.
Fixed Assets Turnover2007 2008 2009
1.01:1 1.09:1 0.89:1
(Please see appendi -8)
Figure-8: Fixed Assets Turnover Ratio ofBH 0 BILLIT 1 N
0
0.2
0.4
0.6
0.8
1
1.2
2007 2008 2009
1.011.09
0.89
Rat2 3
14
11 10
0
2
4
6
8
10
12
14
16
2007 2008 2009
Rat 2 3
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Comments: Fi ed assets turnover was decrease in 2009 compare withthe past 2 years
because of high increasing of fi ed assets.
Total Assets Turnover
2007 2008 2009
0.82:1 0.78:1 0.64:1
(Please appendi -9)
Figure-9: Total Assets Turnover Ratio ofBH4
BILLIT5
N
Comments: Total assets turnoveris gradually decreasing because sales decreasing as a result
in 2009 TAT decrease.
Account ReceivableTurnover
0
0.2
0.4
0.6
0.8
1
2007 2008 2009
0.82 0.78
0.64
Rat6 7
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2007 2008 2009
8.63:1 5.65:1 8.49:1
(Please see appendi -10)
Figure-10: Account ReceivableTurnover Ratio ofBH 8 BILLIT 9 N
Comments:Accounts receivable turnover was good in 2008 because of here receivable was
collecting more efficiently.
AverageCollection Period
2007 2008 2009
42 67 43
(Please see appendi -11)
Figure-11: Average collection period ofBHP BILLIT@
N
0
1
2
3
4
5
6
7
8
9
2007 2008 2009
8A 63
5A65
8A 49
Rat B C
0
10
20
30
40
50
60
70
2007 2008 2009
42
67
43
T B mes
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Comments: Here average collection period is fluctuating because varies on accounts
receivable turnover.
4. Profitability Ratio:
Gross Profit Margin
2007 2008 2009
40% 39.5% 23%
(Please see appendi -12)
Figure-12: Gross Profit Margin Ratio ofBHP BILLITD
N
Comments: In BHP BILLITON perspective, the gross profit margin ratio is decreasing
consistently and in year 2009 it was the lowest which is not good forthe company.
Operating Profit Margin2007 2008 2009
0.41: 1 0.40:1 0.24:1
(Please see appendi -13)
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
2007 2008 2009
40.00% 39.50%
23.00%
Ratio
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Figure-13: Operating Profit Margin Ratio ofBHP BILLITON
Comments: The Companys operating profit margin ratio is decreasing consistently and it
was down in 2009 than othertwo years thatis negative for company.
Net Profit Margin2007 2008 2009
40% 39% 23%
(Please see appendi -14)
Figure-14: Net Profit Margin Ratio ofBHP BILLITON
0
0.05
0.1
0.15
0.20.25
0.3
0.35
0.4
0.45
2007 2008 2009
0.41 0.4
0.24
RatE F
0
5
10
15
20
25
30
35
40
2007 2008 2009
4039
23
RatE F
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Comments: Net profit margin is decreasing consistently and in 2009, it was the lowest
because of netincome down.
Return onTotal Assets (ROA)2007 2008 2009
0.23 0.21 0.07
(Please see appendi -15)
Figure-15: Return onTotal Assets ofBHP BILLITON
Comments:ROA was decreasing consistently from 2007 to 2009 because of netincome
decreases.
Return on Stock olders E uity (ROE)2007 2008 2009
0.45% 0.42% 0.16%
0
0.05
0.1
0.15
0.2
0.25
2007 2008 2009
0.23
0.21
0.07
Ratio
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(Please see appendi -16)
Figure-16: Return on StockG
olders EHuity ofBHP BILLITON
Earnings per Share (EPS)
2007 2008 2009
229.5 275.3 105.6
(Please see appendi -17)
Figure-17: Earnings per share ofBHP BILLITON
Comments: Basically it refers earning per share. In the BHP BILLITON perspective it falls
down consistently and in 2009 it falls terribly.
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0.30%
0.35%
0.40%
0.45%
2007 2008 2009
0.45%0.42%
0.16% Ratio
0
50
100
150
200
250
300
2007 2008 2009
229.5
275.3
105.6 Ratio
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Expenses to Sales Revenue Ratio2007 2008 2009
55.50% 60.49% 76.95%
(Please see appendi -18)
Figure-18: Expenses to sales Revenue Ratio ofBHP BILLITON
Comments: Expenses to sales Revenue Ratio is increased consistently from 2007 to 2009
and that are why profitis decreased.
19. PriceEarnings Ratio
2007 2008 2009
0.16:1 0.15:1 0.18:1
(Please see appendix-19)
Figure-19: PriceEarnings Ratio ofBHP BILLITON
0
10
20
30
40
50
60
70
80
2007 2008 2009
55.560.49
76.95
Ratio
0.135
0.14
0.145
0.15
0.155
0.16
0.165
0.17
0.175
0.18
2007 2008 2009
0.16
0.15
0.18
Ratio
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Comments: Price earnings ratio is fluctuating over the year because of fluctuating market
price per share.
A. Earnings per share on 2008 are 0.18times, which one is greater than other years.
B. market price was cheaper in 2008 than other two years.
C. high price earnings ratio may mean that the investor has high expectation about
the future economic/earnings prospects of the company.
2.1 Comparison with close competitors:
BHP BILLITONS close competitor is Anglo American Plc. Comparison among them on
year 2009 is as following:
B P BILLITO
(US$M)
Anglo American Plc.
(US$M)
Current Ratio 1.9:1 1.3:1
Acid Test Ratio 1.49 : 1 1.40:1
Net Profit Ratio 23% 20%
Account
Receivable
TurnoverRatio
8.49 7.40
Average
Collection Period
43 38
Inventory
TurnoverRatio
10 : 1 9:1
Equity ratio 0.95 : 1 0.89:1
Earnings per share 105.6 73
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Gross Profit
Margin
23% 31%
2.2 Performance ighlights of B P Billiton Group (2003-2008)
The performance of the Group relative to the markets in which it operates over the past five
years is illustrated by the two charts below. The first compares companys TSRperformance
with that of the ASX 100 and the FTSE 100, both of which are broadly-based indices. The
second illustrates performance against the LTIPs peer group index. The Committee believes
that the broadly-based indices and the index of peer group companies are the most
appropriate benchmarks for measuring companys performance. For FY2008, the total return
to BHP Billiton Limited shareholders (as measured by the change in share price plus
dividends reinvested) was 60.72 per cent. Over the same period the total return to BHP
Billiton Plc shareholders (measured on the same basis) was 54.86 per cent. As illustrated by
the charts below, BHP Billiton has strongly outperformed both the market and the pre-2007
LTIP peer group in the level of returns it has delivered to shareholders.
Five-year TSRperformance of BHP Billiton measured against the ASX 100 and FTSE 100
rebased in US$
Five-year TSRperformance of BHP Billiton measured against the LTIP comparator group
rebased in US$
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3.0 Various investment appraisal methods, advantages and disadvantages of each
method
Investment Appraisal
A means of assessing whether an investment project is worthwhile or not Investment project could be the purchase of a new PC for a small firm, a new piece of
equipment in a manufacturing plant, a whole new factory, etc
Used in both public and private sector
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Diagram: Investment Appraisal Method (www.bized.co.uk)
Types of investment appraisal Accounting Rate ofReturn Payback Period (PP); Net Present Value (NPV) /Discounted cash flow; Internal Rate ofReturn (IRR). Profitability Index (PI)
Accounting Rate of Return (ARR)
The accounting rate of return method takes the average accounting profit that the investment
will generate and expresses it as a percentage of the average investment in the project as
measured in accounting terms. Thus:
ARR= Average annual profit/ Average investment to earn that profit *100%
(Atrill and McLaney, 2004)
Benefits:
y It is easy to calculate.y It focuses profitability.y It takes accounting profit into account.
Limitations:
y It does not take into account time value of money.y It does not take timing value of cash flow.
Paybac Period (PP)
The payback period method seems to go some way to overcoming the timing problem of
ARR, or at least at first glance it does. (Atrill and McLaney, 2004)
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Pay back method is the way which recovers the initial investments as quickly as possible. The
benefits and limitation of are as follows:
Benefits:
y It is very simple to calculate.y It seems to be less risky.
Limitations:
y It does not look profitability.y
It does not focus maximizing the shareholder wealth.
y It does not recognize the value of money change overtime.
Net Present Value (NPV)
The Net present value (NPV) method is the classic economic method of evaluating the
investment proposals. It is one of the discounted cash flow (DCF) techniques explicitly
recognizing the time value of money. It correctly postulates that cash flows arising at
different time periods differ in value and are comparable only when their equivalents are
found out. (Pandey, 2002)
Benefits:
yThe use of net cash flows emphasizes the importance of liquidity.
y The time value of money is taken into account.y It takes into accounting time value of money.(Dyson, 2004)y It focuses on profitability.y It gives actual amount.
Limitations:
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y It is crucial to select appropriate rate of interest.y Cost of capital is selected to source of finance.
Internal Rate of Return (IRR)
This method is quite closely related to the Net Present Value (NPV) method in that, like
NPV, it is also involves discounting future cash flows. The internal rate of return of a
particular investment is the discount rate that, when applied to its future cash flows, will
produce an NPV of precisely zero. In essence, it represents the yield from the project. (Atrill
and McLaney, 2004)
Benefits:
y IRRis popular because it is straightforward.y It uses cash flows and recognizes the time value of money.y It tells whether an investment increases the firms value.y It considers the risks of future cash flows.
Limitations:y It requires an estimate of the cost of capital in order to make a decision.y It cannot be used in situations in which the sign of the cash flows of a project
change more than once during the project life.
Profitability Inde (PI)
Profitability index is the ratio of the present value of cash inflows, at required rate of return,
to the initial cash outflow of the investment. It may be gross or net; net being simply gross
minus one. The formula to calculate benefit-cost ratio or profitability index is as follows:
PI =PV of Cash inflows/Initial cash outlay (Pandey, 2002)
Benefits
y Tells whether an investment increases the firms valuey Considers all cash flows of the project
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y Considers the time value of moneyy Considers the risk of future cash flows (through the cost of capital)y Useful in ranking and selecting projects when capital is rationed.
Limitations
y Requires an estimate of the cost of capital in order to calculate the profitability indexy May not give the correct decision when used to compare mutually exclusive projects.
3.1 Proposal of an investment project
During the current year BHP BILLITON reduced their strategic investments in other related
businesses. In the right circumstances taking strategic investments is valuable for the Group,
and the Board will continue to evaluate opportunities. However, strategic investments
compete with other priorities, including debt reduction, for cash, and it is unlikely that further
significant investments will be made in the short term.
4.0 Various sources of finance available for the investment/company
When considering about the various sources of finance for a business, it is useful to
distinguish between external sources and internal sources of finance. Within each of these
two categories, we can further distinguish between long-term and short-term sources. In the
sections that immediately follow; we consider the various sources of external finance. Wethen go on to consider the various sources of internal finance available.
Ordinary
shares
Preferenceshares
Long-
term
Loans/
Debentures
Leases
Total Finance
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Diagram 1.0: Summarises the main sources of long-term and short-term e ternal
finance.
By external sources we mean sources that require the agreement of someone beyond the
directors and managers of the business. Thus, finance from an issue of new shares is an
external source because it requires the compliance of potential shareholders. Retained profit,
on the other hand, is considered an internal source because the directors of the business have
power to retain profits without the agreement of the shareholders, whose profits they are.
Long-term sources of e ternal finance
Long-term sources of finance are defined as sources of finance that are not due for repayment
within one year. As diagram 1.0 reveals, the major forms of long-term finance are:
Ordinary shares; Preference shares; Loans; Lease, that is, finance leases and sale-and- leaseback arrangements.
4.1 Various sources of finance and advantages and disadvantages of each source
including the ris involved
Ordinary shares
Ordinary shares form the backbone of the financial structure of a business. Ordinary share
capital represents the businesss risk capital. There is no fixed rate of dividend, and ordinary
share holders will receive a dividend only if profits available for distribution still remain afterother investors (preference shareholders and lenders) have received their interest or dividend
payments. If the business is wound up, the ordinary shareholders will receive any proceeds
from asset disposals only after lenders and creditors and often, after preference shareholders
have received their entitlements. Because of the high risks associated with this form of
investment, ordinary shareholders will normally require a comparatively high rate of return.
(Atrill, 2004)
Short-term
Debt
factoring
Invoicediscounting
Bank
overdraft
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ADVANTAGES OF ORDINARY SHARES
Ordinary shareholders have voting rights.
They hope to receive large dividends.
They expect to receive an annual dividend.
If the company makes high profits they can expect high dividends.
An interim dividend may be paid to shareholders.
DISADVANTAGES OF ORDINARY SHARES
Dividends are not guaranteed.
If profits are low they may not receive any dividend.
They have to give way to preference shareholders who have preferential
Rights to a dividend.
In the event of liquidation of the company they may lost their capital.
(http://www.auchinleckacademy.e-ayr.sch.uk/accounts/Plc3.PDF)
Preference Shares:
Preference shares offer investors a lower level of risk than ordinary shares. Provided there are
sufficient profits available, preference shares will normally be given a fixed rate of dividend
each year and preference dividends will help be paid before ordinary dividends are paid.
Should the business be wound up, preference shareholders may be given priority over the
claims of ordinary shareholders. (Atrill, 2004)
Loans/Debentures
Many businesses rely on loans as well as share capital to finance operations. Lenders willenter into a contract with the business in which the rate of interest dates of interest payments
and capital repayments and security for the loan are clearly stated. In the event that the
interest payments or capital re payments are not made on the due dates, the lender will
usually have the right, under the terms of the contract, to seize the assets on which the loan is
secured and sell them in order to pay the amount outstanding. Security for a loan may take
the form of a fixed charge on particular assets of the business or floating charge on the whole
of its assets. (Atrill, 2004)
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Interest rates and deep discount bonds
Interest rates on loan finance may be either floating or fixed. A floating rate means that the
required rate of return from lenders will raise and fall with market rates of interest. A
business may issue redeemable loan capital that offers a rate of interest below the market rate.
In some cases, the loan capital may have a zero rate of interest. Such loans are issued at a
discounted to their redeemable value and are referred to as deep discount bonds. (Atrill,
2004)
Mortgages
A mortgage is a form of loan that is secured on freehold property. Financial institutions such
as banks, insurance businesses and pension funds are often prepared to lend to business on
this basis. The mortgage may be over a long period (20 years or more) (Atrill, 2004)
4.2 Recommendation of the best source of finance
For BHP BILLITON, it is easier for them to source their finance through share and
debenture. They can also raise their capital through loans. But recommended sources of
finance would be issue more share, as the economy is recovering from current turmoil
situation and event there were very low profit in the last year, there is a possibility that the
mining group might gain profit in the current year. As it is evident that they already done so
by offering share with offer Price of 1944 pence per Ordinary Share and Market
Capitalisation of 42.90 billion (http://uk.finance.yahoo.com/q?s=BLT.L)
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5.0 References
Atrill and McLaney, (2004),Accounting andFinance for Non-Specialists (4th edn), Prentice
Hall, Essex, UK.
Dyson, J. R. (2004)Accounting for non-accounting students (6th edn), Prentice Hall
Financial Times, Essex, UK
Pandey, (2002),Financial Management(8th
edn), Vikas Publishing House Pvt Ltd, New
Delhi, India.
BHP Billiton (2010), [online], (cited 4 May 2010) Available from Biz/ed [online]
(cited 4 May 2010, 1:10am) Available from >URL: http://www.bized.co.uk/>
Yahoo Finance [online] (cited 12 May 2010), Available from
URL
Available from: URL
[online], (cited14 May 2010)
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APPENDIX
1. Current Ratio
ow calculated:
Current Ratio = Current Assets / Current Liabilities
2007
US$M
2008
US$M
2009
US$M
CurrentAssets
11,087 21,680 22,486
CurrentLiabilities
10,249 16,478 11,850
Ratio 1.08:1 1.31:1 1.9:1
Appendix -1: Current Ratio
2. Quic Ratio/Acid Test Ratio
ow calculated:
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QuickRatio = Current Assets Inventory / Current Liabilities
2007 2008 2009
Current Assets Inventory
7791 16709 17665
CurrentLiabilities
10249 16478 11850
Ratio 0.76 : 1 1.01 : 1 1.49 : 1
Appendix -2: QuickRatio
3. Wor ing Capital to Net Assets Ratio
ow calculated:
Working Capital to Net Assets Ratio = Current Assets Current Liabilities/Net Assets*100
2007
US$M
2008
US$M
2009
US$M
Current Assets Current
Liabilities
838 5,202 10,850
Net Assets 29,918 39,043 40,711
Ratio 2.8% 13.32% 26.65%
Appendix -3: Working Capital to Net Assets Ratio
4. Leverage Ratio/Finance Ratio
ow calculated:
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Debt-to-Total-Assets Ratio = Total Debt / Total Assets
2007
US$M
2008
US$M
2009
US$M
Total Debt 28,250 36,965 38,059
Total Assets 58,168 76,008 78,770
Ratio 0.48 : 1 0.49 : 1 0.48 : 1
Appendix -4: Debt-to-Total-Assets Ratio
5. Debt Equity Ratio
ow calculated:
Debt-to-Equity Ratio = Total Debt / Total Stockholders Equity
2007
US$M
2008
US$M
2009
US$M
Total Debt 28,250 36,965 38,059
Total
Stockholdersequity
29,667 38,335 39,954
Ratio 0.95 : 1 0.96 : 1 0.95 : 1
Appendix -5: Debt-to-Equity Ratio
6. Long-Term Debt Equity Ratio
ow calculated:
Long-Term Debt-to-Equity Ratio = Long-term Debt / Total Stockholders Equity
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2007
US$M
2008
US$M
2009
US$M
Long-TermDebt
18,001 20,487 26,209
Total
Stockholders
Equity
29,667 38,335 39,954
Ratio 0.60 : 1 0.53 : 1 0.65 : 1
Appendix -6: Long-Term Debt-to-Equity Ratio
Activity Ratio:
7. Inventory Turnover Ratio
ow calculated:
Sales / Inventory of finished goods
2007
US$M
2008
US$M
2009
US$M
Sales 47,473 59,473 50,211
Inventoryof finished
goods
3,409 5,203 5,021
Ratio 14 : 1 11 : 1 10 : 1
Appendix -7: Inventory TurnoverRatio
8. Fi ed Assets Turnover
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How calculated:
FAT= Sales / Fixed Assets
Appendix -8: Fixed Assets TurnoverRatio
9. Total Assets Turnover
How calculated:
TAT= Sales / Total Assets
2007
US$M
2008
US$M
2009
US$M
Sales 47,473 59,473 50,211
Total
Assets
58,168 76,008 78,770
Ratio 0.82 : 1 0.78 : 1 0.64 : 1
Appendix -9: Total Assets TurnoverRatio
10. Account Receivable Turnover
How calculated:
Annual Credit Sales / Accounts receivable
2007
US$M
2008
US$M
2009
US$M
Sales 47,473 59,473 50,211
Fixed Assets 47,081 54,328 56,284
Ratio 1.01 : 1 1.09 : 1 0.89 : 1
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Appendix -10: Accounts Receivable TurnoverRatio
11. Average Collection Period
How calculated:
365 Days / Accounts receivable turnover
Appendix -11: Average Collection Period
Profitability Ratio:
12. Gross Profit Margin
2007
US$M
2008
US$M
2009
US$M
AnnualCreditSales
47,473 59,473 50,211
AccountsReceivabl
e
5,499 10,521 5,915
Ratio 8.63 5.65 8.49
2007 2008 2009
365 Days 365 365 365
AccountsReceivabl
e
Turnover
8.63 5.65 8.49
Times 42 67 43
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How calculated:
Sales Cost of goods sold / Sales * 100
2007
US$M
2008
US$M
2009
US$M
Sales Costof goods sold
19,103 23,497 11,571
Sales 47,473 59,473 50,211
Ratio 40 % 39.50 % 23%
Appendix -12: Gross Profit Margin Ratio
13. Operating Profit Margin
How calculated:
Operating profit ratio = Earnings before interest and taxes (EBIT) / Sales
2007
US$M
2008
US$M
2009
US$M
EBIT 19,724 24,145 12,160
Sales 47,473 59,473 50,211
Ratio 0.41:1 0.40:1 0.24:1
Appendix -13: Operating Profit Margin Ratio
14. Net Profit Margin
How calculated:
Net Profit Margin = Net Income / Sales * 100
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2007
US$M
2008
US$M
2009
US$M
NetIncome
18,948 23,190 11,308
Sales 47,473 59,473 50,211
Ratio 40% 39% 23%
Appendix -14: Net Profit Margin Ratio
15. Return on Total Assets (ROA)
How calculated:
Return on Total Assets (ROA) = Net Income / Total assets
2007
US$M
2008
US$M
2009
US$M
Net
Income
13,496 15,962 6,338
TotalAssets
58,168 76,008 78,770
Ratio 0.23:1 0.21:1 0.07:1
Appendix -15: Return on Total Assets
16. Return on Stoc holders Equity (ROE)
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How calculated:
Return on Stockholders Equity (ROE) = Net Income / Total stockholders equity
Appendix -16: Return on Stockholders Equity
17. Earnings per Share (EPS)
2007
US$M
2008
US$M
2009
US$M
EPS 229.5 275.3 105.6
Appendix -17: Earnings per share
18. E penses to Sales Revenue Ratio
How calculated:
Expenses to Sales Revenue Ratio = (Expenses / Sales Revenue) *100
2007
US$M
2008
US$M
2009
US$M
Net Income 13,496 15,962 6,338
TotalStockholde
rs
Equity
29,667 38,335 39,954
Ratio 0.45:1 0.42:1 0.16:1
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Appendix -18: Expenses to Sales Revenue Ratio
19. Price Earnings Ratio
How calculated: Price-Earnings Ratio = Market price per share / Earnings per share
Appendix -19: Price earnings Ratio
2007
US$M
2008
US$M
2009
US$M
Expenses 26,352 35,976 38,640
SalesRevenue
47,473 59,473 50,211
Ratio 55.50% 60.49% 76.95%
2007
Pence
2008
Pence
2009
Pence
Marketprice per
share
37.01 41.14 19.44
EPS 229.5 275.3 105.6
Ratio 0.16:1 0.15:1 0.18:1