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Investment on BHP - Essay Example

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BHP is a large corporate entity which is having its hold on a diversified fields such as mineral, oil, gas and steel. Renowned for its continuous developing structure and operations, is known as one of the Australia's oldest and biggest companies and was listed NYSE and LSE…
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Investment on BHP
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Download file to see previous pages This tells us about the company's efficiency in using current assets as the ones that generate income. The stable cash flow from the years also tells us that the current liabilities are in control, which is within the limits of the company's assets and cash flows. The operational income of the company in the year 2005 is US$8.5billion. This gives reliable earnings per share. Due to the largest market capitalisation of the company one can recommend that not only investing he can hold the shares or debentures of the company for long time as the market capitalisation was being increased constantly from the past years. It is listed on LSE, Australian stock exchange, Johannesburg stock exchange and American Depository receipts listings and New York stock exchange. The Customer sector groups, to which the company gives more importance than its operations concentrate on Aluminium, Base Metals, Carbon Steel Materials, Energy Coal, Stainless Steel Materials, Petroleum, Diamonds and Specialty Products,
At first let us examine the return/risk characteristics of the investment in the company, which is a indicator of past performance. The returns for the company are at a high stake as the company generated turnover of US$31.8 billion, earnings before interest and tax (EBIT) of US$9.3 billion, and net income was at US$6.5. The available cash flow after Accounts Payable was US$8.7. This implies that the net income of the company was almost 20% of the turnover which is a sound fundamental for any corporate entity. As the net income decides the future expansion, earning per share, available cash for the coming financial year, capacity to invest in new projects and R&D it is considered as a fundamental which assures return on the investment. The cash flow was just above the net income. This implies that the cash flow was in proportion to the assets of the company which tells us that the share price increase in the market can be justified. The fluctuation of the prices of the company's shares were around 30% of the maximum price. The maximum price was 19$ and minimum price was around 12$ in 2005. This fluctuation and the maximum price, the share enjoys in the market can be justified due to the substantial percentage of net income and recorded growth of 29.5 percent in operational income of the company in 2005.
The increase of operational income and net income of over 20% of the turnover implies good return for the investment and security for the money invested. The operational income, net profit, and earnings per share were growing continuously in the past years.
The turnover in 2004 and 2005 is US$ 29649 million and 22887 million. The turnover was increased by almost 33 percent but the costs increased only from 17084 to 20697 which indicates good management of operational activities which control cost factor and thereby plays a key role in increasing the net income. The earnings per share had increased by more than 80 percent in 2005 when compared to 2004 earnings. The total current assets stand at staggering US$7822 million which is more than the net income of the company. It is considered as a sound fundamental as the current liabilities of the company were lesser amounting to US$7659 million. The total non current assets stand at US$34288million and total non current liabilities atUS$16087million. This tells us that the domination ...Download file to see next pagesRead More
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