Sample MBA403 Financial and Economic Interpretation and Communication Assignment

MBA403 Financial and Economic Interpretation and Communication Assignment Sample

Assessment Instructions

• Students will select an ASX listed company that has currently published financial statements which meet accepted standards of financial reporting.
• The report is limited to 2000 words (+/- 200 words), excluding the title page, bibliography and appendices.
• The report is to be formally written as per Resource A below.
• The report is to be submitted via Turnitin.

Resource A – Financial Management Report and Content

Executive Summary

• The executive summary provides an outline of: the company background, the stakeholder the report is aimed at and the purpose of the report. It also includes a brief statement of the recommendation(s).
• The executive summary should be approximately 10% of the total word count.

Key Performance Indicators

• Present and concisely discuss key financial results and trends.
• Calculate and present relevant financial ratios.
• Present and concisely discuss non-financial and sustainability indicators.
• Consider using an appendix for extensive data tables or calculations.

Interpretation and Insights

• Explain the causes of the changes in the company’s financial performance.
• Interpret your financial ratios.
• Analyse the non-financial indicators and the company’s sustainability and/or ethical performance.
• Consider the company’s strengths, weaknesses and opportunities. Alternatively, consider the company’s business strategy, competitors and outlook.
• Reach insights on which to base your recommendation(s).

Conclusion and Recommendation

• Present the significant outcomes from your analysis.

• Clearly state an actionable recommendation(s) for your stakeholder. For example, if the report is written for a potential shareholder, recommend a decision to invest or not invest in the company. Alternatively, if the report is written for an internal manager, make a specific recommendation in order to improve the financial performance of the company.

• Justify your recommendation(s).

• The Conclusion and Recommendation should be approximately 20% of total word count.

Bibliography and In-text Citations

• The Academic Integrity and Conduct Policy requires the appropriate use of in-text citations and a bibliography. You must correctly cite all references (information sources) and comply with the expectations for academic writing.

• The bibliography and citations are excluded from total word count.

Solution

Introduction:

The objective of this report for assignment help is to present a detailed understanding of BHP, which is one of the leading mining Companies listed on ASX. In this report, the key performance indicators of the company and changes in a recent financial year will be elaborated (bhp.com. 2022). At the same time, the financial performance of the organisation will be evaluated by applying an appropriate range of financial ratios, and the same would be compared with Rio Tinto for a better understanding of the financial position. The report will also analyse the non-financial and strategic factors which should be considered while making investment-related decision.

Key performance indicator

Financial results and trends:

In the recent financial year, the sales revenue of the company has significantly increased. The revenue of the company was 42931 in 2020, which increased to 60817 million in 2021. The EPS of the company has also improved from 157.3 to 223.5 US cents. However, there was a small increment in total assets and net assets. In the recent financial year, the company has significantly managed from 12044 in 2020 to 4121 million, which indicates the overall gearing position.

Calculation of the financial ratio

The summary table of calculation is provided above, the detailed calculation is provided in appendix.

Non-financial and sustainability indicator

Along with developing the existing businesses, the company is also investing heavily in the environmental and social programs, which is also increasing the performance of the company.

In addition to that, the company has identified their performance for the future, and the company has developed a business merger proposal to create a global top 10 independent Energy companies. At the same time, the company is willing to unify the corporate structure for flexibility to operate in the future.

Interpretation and Insight

Explanation of the causes of changes in the company's financial performance
Considering the business analysis for the company to identify BHP is one among the company that is willing to have an absolute market-leading strategy by investing in future businesses. Considering the energy and commodity needs of the business, the company has acquired various investments and areas of interest for their mining businesses. The company's performance for significantly impacted because of the covid-19 pandemic, with the Global economic work sustained because of the government restrictions and the Highly Effective covid-19 virus. However, in the next financial year, the company has identified significant growth in the recent financial year because of a substantial increase in the Global energy need. In addition to that, the company is investing heavily in the renewable energy business directly and indirectly. The company provides metal copper, Nickel and others, which is helping the renewable energy and electric vehicle business by supplying quality copper, Nickel and others.

Interpretation of financial Ratio

Profitability ratios:

Operating profit margin:

The operating profit margin of the company will speak about the operating profit-earning capacity in comparison with the revenue, which will indicate the earnings generated by the organisation from its business. The operating profit of BHP Billiton was 34% in 2020. However, with a significant increase in revenue by almost 42%, the operating profits of the company have increased to 43%. The increase in operating profit margin suggests that the overall profitability aspect of the organisation is providing a substantial value return against the revenue (Hushko, Temchenko and Kryshtopa, 2020).

Net profit margin:

When it comes to performance and profitability analysis for any organisation then, the net profitability of the business becomes the most influential factor. In the financial year 2020, the net profit margin of BHP Billiton was 20% which increased to 22%, suggesting an implement internet profitability by 9% compared to the previous financial year. Even though the operating profitability of the company has increased by almost 27% in the recent financial year, the increment in net profitability is comparatively low because of substantial payment of financial expenses and tax-related obligations.

Gearing:

Debt to Equity ratio:

The debt-to-equity ratio of the company will suggest a gearing position by comparing the total debt against the equity. As per the recent financial statement is identified that the long-term debt to equity ratio of the company was 0.12 in 2020, which is for the decrease to 0.07 in 2021 because of significant repayment of long-term borrowings.

Interest coverage:

The interest coverage ratio is and financial and solvency Indicator which will analyseanalyse the interest payment capacity of the organisation. To calculate the interest coverage ratio, the operating profits are compared with the financial expenses. In 2020 the interest coverage ratio of the 11.43 times which has increased to which has increased to 18.8 times Because of the substantial increase in operating profitability in comparison with the financial expenses (Kawani and Abdal, 2020).

Liquidity:

Current ratio:

The current ratio is one of the important security measures for any Organisation in feature comparison between the current assets and current liabilities are recorded (Ikegawa, 2020). Under general preference, the current ratio of more than two is highly liquid in nature; however the current ratio to trend is expected to change based on the industry. In the financial year 2020 the current ratio of BHP Billiton was 1.45 :1. In 2021 because of the increase in current assets by 24% the overall current ratio of the company has increased to 1.63:1, resulting and improvement in the liquidity position.

Quick ratio:

In the case of mining companies, a significant stop is remained in hand in the form of inventory there for the quick ratio is calculated to determine the real-time solvency status of the organisation by comparing the current assets after deducting the inventory with the current liabilities (Kusmayadi, Rahman and Abdullah, 2018). The quick ratio of the company was 1.37 :1 in 2020, Which has increased to 1.54:1 in the next financial year. The increase in the current ratio in the quick ratio indicates that the overall liquidity position of the company is a is preferable position.

Asset Management:

Trade receivable turnover:

The trade receivable turnover is a significant Asset Management ratio for the company which indicates the efficiency of the company in managing their credit sales and connecting the dues from the customers (Amanda, 2019). The trade receivable turnover for the company was 12.76 times in 2020 which has deteriorated to 10.04 times in 2021. The reason behind the decrease in interest receivable turnover for the company is because of the increase in account receivable outstanding balance which indicate that the company is extending their credit facility to their customers (Hertina and Saudi, 2019).

Return on assets

The return on Assets and other Asset Management ratio which indicates the efficiency of the organisation to generate revenue and profit against their total assets (Amanda, 2019). In the financial year 2020, the return on assets for the BHP Billiton was 8% only, which has increased to 12% because of the substantial increase in the net profitability by 54% against which the total assets have increased by 23%.

Analysis of the non-financial indicators for the company's sustainability

Beside The financial factors of the company then on financial factors which is impacting the sustainability of the company is also indicating greater efficiency and control of the business. For instance, the company has identified the material sustainability issues, namely the employee management, considering the environmental matters, the social and Human Rights obligations for the company, implementing anti-corruption and ant bribery matter and others. In all those expect the company has initiated significant policies and Standards which is enacting the code of conduct that the management should perform in all those matters. In the page 33 of recent annual report the company has also identify the principal risk related to the sustainability issues and it has indicated the non-financial key performance indicators for those risk which is improving the company’s understanding and managing the business affairs (Mulyadi and Sihabudin, 2020).

SWOT analysis for the BHP

In this section of the report the strength weakness opportunity and the critical risk factors will be discussed with the help of SWOT analysis Strength:

? The BHP Billiton is having access to the diversify portfolio of natural resources which is providing them stability in operating in this industry
? The constant from financial performance and increment in revenue is providing additional strength to the company and its shareholders
? The international presence of the company is another important factor which is working in favor of the organisation
? The minimum leverage position is providing the company a substantial growth opportunity without impacting its solvency status (Purnomo and Tjendrasa, 2020)

Weakness

? Even though the recent performances of the company are expanding rapidly but the previous performances and profitability of the company was more lucrative than it is earning today

? Most of the company's revenue is dependent on very few countries like China, therefore if there is volatility and a decrease in demand in those countries, the company's overall performance will be impacted.

Opportunity

? The company has initiated significant merger and acquisition strategies which is helping in expanding their operation.

? The company is also willing to invest in the innovation and Technology businesses to enhance their future performance
Threat

? The international political scenario specially between the west vs Russia and China is impacting the global economy.

? The fluctuation in foreign currency translation is impacting the company's profitability

Company's business strategy

The business strategy of BHP Billiton is that identification and Exploration of various area of interest and developing the areas from which the company can explore the mining or and reserve. In addition to its own Research and acquisition of the area of interest the company also acquire the small-scale companies who is having access to different mining assets at the same time the company is expanding their product portfolio to the items which can be used for the electric vehicle and renewable energy businesses.

Competitors and Industry Outlook

The current comparative performances of the companies engaged in the same sector is also having a substantial revenue growth for instance The Rio Tinto which is another recognise mining company in Australia and having operations across USA and the world, has recorded a revenue growth of 77% in 2021 and the company has generated 36% net profit against their revenue which indicates high profitability position (Riotinto.com. 2022). In addition to that after the covid-19 pandemic When the Economist are getting restore the demand for the energy and raw materials for the various Industries is keep on increasing which will be beneficial for the company (Hushko, Temchenko and Kryshtopa, 2020).

Insights on which the recommendations should be initiated
Even though the company's overall performance is substantial, and it is growth prosperous the company will have to work on the following aspects

? Net profitability
? Improvement in accounts receivable management
? Improving the product portfolio and diversification of the business.

Conclusion and Recommendation

After conducting the financial analysis for the BHP Billiton for the recent financial year and comparing it with the previous financial year it is identified the company's growth opportunity in terms of revenue and profitability is significant compared to the previous year. However, the competitor companies like the Rio Tinto are Providing more value returned to the investor in terms of higher net profitability and operating profitability. In addition to that, the accounts receivable turnover for the Rio Tinto has increased significantly in 2021 compared to the previous financial year which indicates that BHP Billiton is required to improve their accounts receivable management strategy. The non-financial indicators and the SWOT analysis for the company is indicating that the oval performance of the organisation is growth process however the concerns over the strategic objectives for the organisation is required to be initiated with efficiency otherwise it will have a significant consequence. As of now in the company will be recommended to improve their net profitability because the differences between the operating profit and net profit is substantial and which is because of the financial expenses and Taxes.

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