Instruments and Markets - Essay Example

Instruments and Markets Ratio Analysis 0 BHP The BHP Billiton Limited is a public traded company that engages in a diversified portfolio of natural resources worldwide. It embarks on oil and gas exploration, development and production. It also engages in aluminum smelting, copper, lead, silver, molybdenum, zinc, uranium and even gold. This is a hugely capital intensive venture and require significant investment in assets. Also the company is dependent on fluctuating world markets of commodities such as oil and metals which might affect its profitability.

Below is a ratio analysis of the company’s finances.a) Liquidity ratiosCurrent Ratio A company needs to be able to meet its current liabilities using its current asset for it to be operational. Companies have short term liabilities that need to be paid and also long term liabilities due (Vandyck, 2006).Therefore the BHP Company has a current ratio of 0.97 which implies that the current asset and the current liabilities almost cancel out. This is a safe cash flow position that shows the firm can adequately service its obligationb) Management efficiency The company’s level of efficiency in terms of return on assets stood at 9.

44% while the Return on equity was 15.92%. These ratios give the efficiency at which the company’s resources were used to achieve the various results and how effective they were.Return on Assets9.44%Return on Equity15.92%c) ProfitabilityProfitability is the most obvious yardstick of the performance of the company to analyze this we shall use both profit margin and operational marginProfit margin 16.48%Operating margin 30.59%d) Leverage ratioDebt to equity ratio 49.82 The debt to equity ratio gives the distribution of the capital structure in terms of how much is contributed by stock and how much by debt.

A high debt to equity ratio would mean a company is heavily dependent on debt and hence plenty of its future profits would be tied down and there would be less flexibility. A debt to equity ratio of almost 50% shows the two sources of capital are evenly distributed.2.0 Woolworths (WOW)a) Liquidity ratiosCurrent Ratio References Vandyck, Charles K. 2006. Financial ratio analysis: a handy guidebook. Victoria, B.C.: Trafford.RBA: CGS Bond Prices. 2013. http://www.rba.gov.au/fin-services/bond- facility/prices/2013/bp-jun13.

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