Discuss About The Comparing The Figure Company With Another?
BHP Billiton is considered one of the biggest players in the resource industry that has its operations diversified throughout the world. It is primarily dual listed and is situated in Australia with primary listing on the Australian Stock Exchange. It is the largest producer of items like coal, iron ore, etc that facilitates in the generation of higher revenues. The company has also diversified its affairs in the production of gas, oil, etc. The key priority of the company is to possess a mechanism that can lower the cost of its assets and that are divided by the market and other geographical boundaries (BHP Billiton, 2016). Moreover, the prior objective is to address the requirements of its customers and for such purpose, BHP intends to extract minerals, oil, and gas from diversified places situated in Australia. In addition to this, BHP Billiton comprise of a workforce containing more than one lakh employees that are directed towards the attainment of the company’s goals and visions operations.
BHP Billiton’s efficient corporate planning process has allowed it to address major challenges prevailing in its path towards success. Further, such challenges mainly relate to the external environment and addressing the same assists in enhancing the total return. Furthermore, the planning strategy of the company is established in such a way that it facilitates in mitigating several uncertainties that prevail internationally. Nevertheless, the framework of the company also plays a key role in structuring the external concerns that incorporate technical, political, and governance factors (Albrecht et.al, 2011). Moreover, the prevalence of compliance and governance processes within the company’s operations assures that all the internal control mechanisms are properly framed so that other strategies are not affected as well. On a whole, BHP’s framework is designed in a way that allows it to tackle adverse circumstances and build a path for safe future (Brigham & Daves, 2012).
The total debt of the company comprise of interest-bearing liabilities and in relation to the same, the company have also issued US$5 billion global bonds. Furthermore, in the year 2015, the net cash flow of the company increased to US$284 that enhanced from US$8.3 million in the past years. BHP does not consider the policy of commercial papers for financial purposes that are majorly assisted by credit facilities. Instead, the company utilizes a hybrid of multi-currency for financing its operations. Further, based on the new structured policy of the company, lesser dividend was paid to the shareholders. The primary objective of the Group is to possess and operate significant assets that are of high effectiveness and with low costs so that future goals can be achieved (Subramanyam & Wild, 2014).
With the assistance of gearing ratio, the company has financed its major businesses. Further, the group’s exposure is to present to the risk of interest rates on its major borrowings that are outstanding in nature. Besides, the company is doing the sustenance of such risk of interest rate through the mechanism of portfolio risk management (Deegan, 2011). Further, the group at fixed interest rates issues debts and their exposure is also prevalent to the swapping of interest rates. Nevertheless, the financing activities of the company consists of receipts from the liabilities that possess an interest bearing nature and other gains from debt-related measures, ordinary shares, payment of dividends, buy-back, etc. Thus, these major financing activities generate cash flow for the group.
It can be witnessed from the computation that the company’s liquidity is effective and therefore, it can easily address its obligations. Further, the company’s current assets are adequate to cater to current liability requirements in the future. Besides, the increment in the liquidity ratios of the company like quick ratio and current ratio clearly proves the fact that strong importance is being given to liquidity over the years (Porter & Norton, 2014). In contrast to this, the company’s decline in net profit margin in the current year must be addressed as soon as possible.
In relation to BHP Billiton, it can be witnessed from the computation of various capital structure ratios that the company has relied on debt over the years and the ratios clearly support this fact. In simple words, it can be said that the capital structure of the company is comprised of debt more than any other source of finance that is a bad indicator for future aspects. As a result, massive outflow of cash will be facilitated through interest on such debts and the equity ratio being less than 0.50 is of some relief for the company. This means, higher such ratio, the more beneficial it will be for the company (Brigham & Ehrhardt, 2011).
ANZ Group offers a wide range of financial and banking products and services to its customers. It is regarded as the fourth largest bank of Australia based on market capitalization that aims to serve more than four million customers through a network of more than 1500 ATM’s and 900 branches scattered all around the globe. The major operations of the company derive from Australian business with retail banking and commercial banking dominating in nature. Additional retail banking affairs of the company are situated in the Asia-Pacific region that includes Hawaii and Indonesia (ANZ, 2016). Other services and products of the company also comprise of consumer financing, mortgage financing, wealth management, rental services, equipment and vehicle financing, corporate banking, etc. In order to cater to all these services, the company has more than $914 billion assets that make it a tougher competitor in the eyes of other banks.
The position of ANZ stands strong because of the prevalence of $914.9 billion assets in the year 2016. Such assets are of world class that plays a key role in serving as a strong driver of performance. Furthermore, the company has also delivered an efficient financial performance based on management of tight costs and market share gains with small and retail business franchises producing powerful outcomes. In relation to employees, the company has indemnified specific employees from and against damage, loss, penalty, expense, etc so that they can operate in good faith and in a manner that they believe to be within the company’s scope. Overall, along with an emerging economy and powerful base of infrastructure, the group’s long-term perspective is very strong despite encountering huge losses in the current year. This can be proved by the fact that its operating income declined to $561 million and its operating expenses enhanced to $1044 million that is eleven percent more than the past year.
The primary business model of the company comprise of raising resources through wholesale debt markets, customer deposits, and lending of such resources to the ultimate consumers. Further, the Group attains major revenues from its wealth businesses through the offering of superannuation, insurance, and fund management services. In addition, the group acquires funds from market businesses from trading, sales, and risk management affairs as a whole. The company also focuses on its Corporate Sustainability Framework that allows it to deliver responsible and fair banking to its customers. Furthermore, such framework allows it to assist the delivery of its business strategy (Davies & Crawford, 2012). Besides, while acknowledging the challenges in future, it is worth depicting on the contributions the bank has made. This can be proved by its community investments of $90 million that is around 85% of the public sustainability targets of the bank. The risk management framework also allows it to create value for the business and which is vital for its smooth functioning.
It can be witnessed from the annual report of ANZ that the year 2016 has been a transition phase for it owing to a statutory profit after tax of $5.7 billion that is down by 24%. This shows that its financial position is very weak. Furthermore, owing to derivation of income, the bank has primarily four sources of income. Net interest income that depicts the difference betwixt the interest income attained by the company on its lending affairs minus the interest paid on wholesale funding and customer deposits (Fields, 2011). Net fee and commission income that depicts fee income attained on non-lending and lending financial products and services. Net insurance income and fund management that depicts income attained from offering of insurance, investment, and superannuation outcomes (Choi & Meek, 2011). Lastly, other sources which depicts revenues attained from sales, risk management, and trading activities.
In the case of ANZ, it can be seen that the debt proportion of the company is relatively low and less than one over the years. However, it has been increasing every year that is a major concern that must be addressed. Further, the equity ratio of ANZ is less than 0.50 over the year that is a bad indicator for future growth.
The current ratio of ANZ is significantly above 1.5 over the years but it started declining from 2014 and it reported at 0.26 in the year 2016 that is a bad indicator in terms of liquidity. Further, in relation to net profit ratio, the same have increased over the years but it started declining from 2015 and so on. This is a very bad indicator in terms of profitability and the same must be addressed as soon as possible by the company (Brealey et. al, 2011).
It can be seen from the annual reports of both the companies that they are committed towards maintaining an enormous standard in their respective governance frameworks. Both the companies confirm that they have adhered to the ASX Corporate Governance Principles and Recommendations and compliance of the same can be viewed in their respective websites. Furthermore, relevant details regarding the stakeholder engagement model can also be viewed in the corporate governance section of both the companies.
It can also be seen from the annual reports of both companies that sustainability is at the core of their charter values. On one hand, the framework of corporate sustainability of ANZ assists it in delivering responsible and fair banking to the customers (Shah, 2013). Similarly, on the other hand, the framework of sustainability in BHP Billiton assists it in integrating environmental, safety, health, and other socio-economic factors for relevant decision-making. Nevertheless, both the companies play an important role in economic development and enhancement of living standards of people (Horngren, 2013). Besides, as a part of making a relevant and efficient contribution as community partners, both the companies seek long-term relationships that can assist them in respecting rural culture and establish lasting benefits.
When it comes to ANZ and BHP Billiton, it can be witnessed that investors in BHP Billiton were depressed because of low returns in the capital returns. However, the same can be attributed to the fact that the company’s capital management is very ineffective and weak in nature. On the other hand, even though ANZ has witnessed a loss in the year 2016, yet it pursues a stronger capital management approach that assists it to safeguard the interests of shareholders, depositors, and creditors. Furthermore, for achieving such purpose, ANZ possesses an ICAAP (Internal Capital Adequacy Assessment Process) that assists it in conducting detailed capital and strategic planning over a long-term medium horizon (ANZ, 2016).
ANZ stresses on maintaining a strong credit rating of AA- that is fundamental to the ongoing stagnancy of the company. On the other hand, BHP has better credit rating of ‘A’ that allows it to attain competitive advantage in the resource industry (BHP, 2016). Besides, if the credit ratings of BHP is altered, future cash flows and capability to access capital will be badly affected and if ratings of ANZ is altered, the most affected will be its risk profile, operating performance, and capital structure (ANZ, 2016).
It can be witnessed from the report that both companies have abilities to grow stronger in future and market fluctuations have immensely affected them in a negative way. This shows that market fluctuations play a relevant role in the development of both companies. However, on one hand, BHP relies more on debt while on the other hand, ANZ’s capital structure is stagnant. Such debt can prove negative for BHP and if corrective actions are not taken, it may face massive issues.
References
ANZ 2016, ANZ Bank Annual Report and accounts 2016, viewed 11 September 2017 https://www.anz.com/resources/d/1/d1b2cc12-3cf2-4909-a716-b03d245f9773/annual-report-2016-en.pdf?MOD=AJPERES
BHP Billiton 2016, BHP Billiton Annual Report and accounts 2016, viewed 11 September 2017 https://www.bhp.com/investor-centre/annual-reporting-2016
Porter, G & Norton, C 2014, Financial Accounting: The Impact on Decision Maker, Texas: Cengage Learning
Shah, P 2013, Financial Accounting, London: Oxford University Press
Subramanyam, K & Wild, J 2014, Financial Statement Analysis, McGraw Hill
Albrecht, W, Stice, E. & Stice, J 2011, Financial accounting, Mason, OH: Thomson/South-Western.
Brealey, R., Myers, S. and Allen, F 2011, Principles of corporate finance, New York: McGraw-Hill/Irwin.
Brigham, E. & Daves, P 2012, Intermediate Financial Management , USA: Cengage
Brigham, E.F. & Ehrhardt, M.C 2011, Financial Management: Theory and Practice, USA: Cengage Learning.
Choi, R.D & Meek, G.K 2011, International accounting, Pearson .
Davies, T. & Crawford, I 2012, Financial accounting, Harlow, England: Pearson.
Deegan, C. M 2011, In Financial accounting theory, North Ryde, N.S.W: McGraw-Hill.
Fields, E 2011, The essentials of finance and accounting for nonfinancial managers, New York: American Management Association.
Horngren, C 2013, Financial accounting, Frenchs Forest, N.S.W: Pearson Australia Group.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download
