Financial Management: BHP group limited Assignment Sample

Financial Management: BHP group limited

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1. Executive summary (BHP)

The summary contains the overall view along with the recommendation for the BHP. The research study focused on the firm BHP group limited, which is a multinational-based organization and is known for the production of mining metals, natural gas, and petroleum. The headquarter of the organization is established in Victoria, Australia, in 2001, BHP ltd merged with various organizations in Australia, broken hill. The BHP limited company has mainly known for producing iron, coal, petroleum, copper, natural gas, and nickel. The organization touched the revenue target of around $60.17 billion. It has achieved the milestone and ranked 94th in the world as the largest public organization. The net operating income of the organization is near $ 13.451 and it has a total assets structure of around $108.927 billion. The overall equity share of the organization is around $51.264. It needs to collect overall important data for future reference and to improve the efficiency of the work. It required to bring various kinds of changes in the organization needs to higher the high skilled employee for the top management of the organization. The organization is required to follow several kinds of rules and regulations need to avoid several kinds of business risks which may impact the overall performance of the organization. It may lead to the failure of the organization in the economic sector of the organization. The organization needs to follow the guidelines and move according to the plan for the further to avoid business risk. The financial structure of the organization shows the organization's current assets along with the financial performance reduced and it indicates the organization faces various kinds of financial crises due to various kinds of challenges faced by the organization. The organization is required to follow the strategy to reach the target and enlarge the profit for the company to avoid financial issues and several challenges.

2. A brief overview of the company

The research study has focused on the firm BHP Group Ltd, which is a multinational company and producer of mining metals, natural gas, and petroleum. The headquarter of the company is situated in Victoria, Australia. In 2001, BHP ltd merged with another company in Australia, Broken Hill (Argus, and Samson, 2021). The public limited company has served main products of iron, coal, petroleum, copper, natural gas, and nickel. The revenue structure of the company is almost $60.817 billion. BHP Group was ranked as the 94th Largest public company in the world in 2022. The operating net income of the firm is around $ 13.451 billion. The total asset structure of the company is around $108.927 billion. The entire equity structure of the company is almost $51.264. The company's stock exchange is in a high structure, which is beneficial for the firm. Since 1885, the firm BHP has played an essential role to improve economic growth.

In economic development, BHP has grown its operational performance. The financial return of the company and its strong financial position has operated the investing activities of the firm. Through which the market performance of the firm in the international stock market is high. Therefore, the largest company in Australia has become one of the best stocks among investors.“Escondida and Spence are part of the creation of a mining strategy led by the OECD in BHP”. The potential outcome of the BHP has attracted investors in a strategic way. The diversification of resources in the company extracts the market process in the global stock. In the year 2020, the firm has faced issues with financial performance due to the pandemic situation, and the revenue structure of the firm has reduced by 10% which impacts the stock prices.

3. Discussion of risk

The BHP risk that may affect the business is explained in brief. The organization's risk refers to the liabilities of the organization, which may affect the generating revenue and can decrease the profit of the organization or it may take to failure. Something, which can threaten the ability to reach the target or financial goals, is known as a business risk. The several kinds of elements, which can analyze the risk of the organization, and several occur when the head of the department creates circumstances where the organization may uncover a higher risk. The several types of risk that may occur in the organization “systemic risk” and the other is “systematic risk”. Systemic risk refers to it explains the appearances which may particle a vital breakdown in several organizations or may affect the edge of the economy (Basura, et al 2020). The risk may be aciculate the frequent it can be external collision for the entire system, it can be known as the vital part for the breakdown of the organization. Systemic can be a high threat for the organization related to financial risk, and it can harm the economy as well but tackling the risk is far more dissimilar than systematic (Clauss-Ehlers, et al 2019). System risk can be evaluated as the risk that BHP chance of high risk can produce a huge breakdown. It is difficult to identify and along with that, it is much harder to forecast and provide an explanation for this kind of risk.

It symbolizes the risk that shows and leads to the collapse of the organization, it can affect the financial body of the organization, or may it can bring overall failure in the economic sector of the organization(Li, & Juan, 2019). It can assist with the explanation for several issues, or the small issues, related to the problem related to protection of the bank balance and the maintenance of the bank, or the data related to the information of the organization's website. The enlargement in addressing the problem related to the financial emergency may take to the failure in the economic section of the organization(Marshall & Ceylan, 2020). It usually comes in work for explaining the health of the organization, which may simulate the overall function of the organization (Qiu, et al 2020). It has concluded that it describes small economic problems can put a huge impact on the financial sector of the organization.

“Systematic risk” is known’s for addressing the uninterrupted risk of the market which can put impact the organization and lead to various kinds of annoying factors. It refers to the everyday impact, everyday Collision, which can bring about various mergers of the elements, it includes financial structure, rate of interests, health structure of the corporate world, political problems, and several various factors like this which put huge factor for the organization. It has various ordinary meanings, along with it can more exposure to the organization, its enlargement and bring the interchange in several risks which are known as a general market risk for the executive business (Vlot, et al 2021). The risk of the market can produce a downturn, weakness in the period of the economic sector, rate of faster interest, changes can come into the price of the goods or it may affect the currencies along with problems in various big images. It cannot be pummeled out along with various kinds of methods of asset allocation; it helps to control the specific risk of the market that the organization is going through. It occurs due to the risk of the border mover section of the organization (Xu, 2020). It intimates the strategy and moves slowly as it is required to solve our problem.

Table 1: Discounting rate

(Source: Created by the leaner)

The rate of discount is taken 10. Percentage and it provide the report that the future expected cash flow of BHP for upcoming five year has been estimated in table 3

Table 2: Future cash flows

(Source: Created by the leaner)

4. Calculation of fair value

1. Measurement of the firm's financial performance

Figure 1: Balance sheet of BHP Ltd.

(Source: bhp.com, 2022)

The financial performance of the firm has indicated that in the year 2018, the value of the net assets is around 26609. In the year 2019, the value of the current asset is around 18,365, in the year 2020, the asset value is 17,377. It seems that the financial performance of the company in a rare asset structure has reduced (Hu,and Walter,2022). Through this the firm has faced financial challenges and issues. In the year 2021, the value of the asset is almost 19322. It has been observed that the financial performance of the firm has been reducing due to the marketing exchange rate. Total assets value of the firm is around 84827 in 2018 and in the year 2021, the asserted value is 78850. The growth rate of the asset reduced in 2021.

Figure 2: Balance sheet of BHP Ltd.

(Source: bhp.com, 2022)

Based on the above structure it has been analyzed that the total liability is around 38874 in 2018. In the year 2019, the value is around 38530, in the year 2020, the asset value is 43346. It seems that the financial performance of the company in the liability structure has reduced. In the year 2021, the value of the liability is around 38599. It has been observed that the financial performance of the firm has been increasing by reducing liability. The long-term debt of the firm is around 18231 in 2018, in 2019, the amount is around 18203, and in 2020 the value is 17834. It has been observed that the long-term debt of the firm has been reduced which is beneficial to the firm and for its future performance (McKenzie, 2018). In the year 2021, the value of the liability is near 13287 which is a positive sign for the firm.

2. Forecast the future performance of the Firm

In the year 2018, the value of the current ratio is almost 2.51 and in the year 2019, the value is near 1.89, which indicates that the value of the firm has decreased, which is not beneficial to the firm. The current ratio of the firm must be upgraded to develop financial performance. In the year 2020, the value of the current ratio is almost 1.45 and in 2021 the ratio is around 1.63. This indicates that the future performance of the company will increase due to the higher growth in 2021.

It can be assumed that the future performance of the firm will also increase. Due to the high asset structure of the firm, it can increase the growth percentage in the upcoming years. Moreover, the quick ratio of the firm also increases in the year of 2021. In the year 2020, the value of the firm has decreased due to the structure of the pandemic. On the other hand, the gross income growth of the form is around 8.54% in 2019, and in 2020 the growth rate is almost 3.09% (Buenrostro et al. 2019) . Therefore, in 2021, the income growth has leveled up to almost 59.15%. It has been observed that the Gross income of the firm also increases in the firm due to the selling and investing activities. The EBITDA of the firm has also increased by 70.37% in the year 2021, which is also beneficial to the firm.

3. Dividend discount model of the Firm (fair value)

Table 3: Dividend Discount Model of BHP Ltd.

(Source: Self-created)

Based on the above table it has been analyzed that the dividend discount model of the firm indicates the prediction price of the stock. In the present day, the stock performance of the firm has been evaluated by the dividend model (Agbodike, Osokogwu, and Achumba, 2019). In 2022, the value of the Dividend per share is almost 3.25, and the discount rate of the firm is almost 10%. Moreover, the growth rate of BHP is around 7%. The value of the Dividend 1 is almost 3.01 and Dividend 2 near 3.25%. The total value of the dividend is 7.97% which is given to the shareholder.

References

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Website

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