Essays on Finance over the Business Cycle Case Study

Download full paperFile format: .doc, available for editing

The paper 'Finance over the Business Cycle' is a wonderful example of a Finance and Accounting Case Study. BHP Billiton uses a blend of Debt and Equity. The company’ s latest financial ratio, the 2013 financial report showed that the company’ s Debt to Equity ratio was 0.46 times. The value of 0.46 times shows that the company uses more equity as a source of capital compared to debt. The main risks that the company faces are Fluctuations in prices of commodity and the impacts of the ongoing economic volatility in the world, currency exchange rate fluctuations, and the political events in the countries in which they operate in.

A lot of analysts are of the fact that in the past 5 years, the stock performance and the share price of the BHP Billiton have not been so good. Firm Analysis The shareholders contribute a significant part of the capital that runs the business. In BHP Billiton there is a clear separation between the ownership and the management of the company. The owners of the company are the shareholders whereas the company is run by the board of directors and the Chief Executive Officer.

This structure, ownership, and management are one of the best ways in which the company runs since one party checks the other party. BHP Billiton faces competition from three other companies in the industry and they include Vale S. A, Rio Tinto Limited, and Alcoa Inc. From the analysis of the BHP report, it is important to note that there is Unity in the management of BHP Billiton and also among the shareholders hence no conflicts among them. There are also no issues regarding agent costs relating to the costs. The HSBC Custody Nominees (Australia) Limited are the major shareholders with 17.36 of the issued capital.

This is followed by JP Morgan with a percentage share capital of 12.86% and National nominees, which has a share percentage of 9.25%. The document below shows the list of the top shareholders, from the highest to the lowest.     Financing The companies financing structure, play an important role in the growth and development of any company. So how does financial structure influence growth and development? This so because there are certain advantages and disadvantages that are associated with a specific capital ratio.

BHP Billiton uses a blend of Debt and Equity. The company’ s latest financial ratio, the 2013 financial report showed that the company’ s Debt to Equity ratio was 0.46 times. The value of 0.46 times shows that the company uses more equity as a source of capital compared to debt. The graph below (graph a) shows the financing structure of BHP Billiton for the past few years. (Graph a) From the graph above, it can be noted that the company has significantly reduced its debt financing over a few years and this justifies the decrease in the value of Debt to Equity Ratio. The second graph (graph b), analyses the structure of BHP Billiton in comparison to other companies in the industry.   From the table above it can be observed that BHP Billiton is among the three companies with the lowest Debt financing ratio.

References

Atkinson, G., 2014. Is the BHP Billiton share price telling us something? - See more at: http://www.shareswatch.com.au/blog/stockmarket/is-the-bhp-billiton-share-price-telling-us-something/#sthash.tTgzLDvt.dpuf. [Online]

Available at: http://www.shareswatch.com.au/blog/stockmarket/is-the-bhp-billiton-share-price-telling-us-something/

[Accessed 21 May 2014].

BHP Billiton, 2013. 2013 Financial Report. Our share Values, 1(1), pp. 1-296.

BHP Billiton, 2014. Our history. [Online]

Available at: http://www.bhpbilliton.com/home/aboutus/ourcompany/Pages/ourHistory.aspx

[Accessed 20 May 2014].

Bloomberg L.P, 2014. BHPLF. [Online]

Available at: http://www.bloomberg.com/quote/BHPLF

[Accessed 29 May 2014].

Carla, C. B., 2014. BHP Billiton to invest US$1b. [Online]

Available at: http://www.trinidadexpress.com/business/BHP-Billiton-to-invest-US1b--243603431.html

[Accessed 21 May 2014].

Covas, F. & Haan, W. J., 2006. The role debt equity finance over the business cycle. Ottawa: Bank of Canada.

DIVIDEND GROWTH INVESTOR, 2013. BHP Billiton (BBL) dIVIDEND Stock Analysis. [Online]

Available at: http://www.dividendgrowthinvestor.com/2013/02/bhp-billiton-bbl-dividend-stock-analysis.html

[Accessed 28 May 2014].

Macroaxis Inc., 2014. BHP Billiton Debt to Equity. [Online]

Available at: http://www.macroaxis.com/invest/ratio/BHP--Debt_to_Equity

[Accessed 21 May 2014].

Stock Analysis on Net , 2014. BHP Billiton Ltd. (BHP). [Online]

Available at: http://www.stock-analysis-on.net/NYSE/Company/BHP-Billiton-Ltd/DCF/DDM

[Accessed 28 May 2014].

Stock Analysis on Net, 2014. BHP Billiton Ltd. (BHP). [Online]

Available at: http://www.stock-analysis-on.net/NYSE/Company/BHP-Billiton-Ltd/DCF/CAPM

[Accessed 28 May 2014].

Download full paperFile format: .doc, available for editing
Contact Us