Appendix Finance

8/8/2019 Appendix Finance

1/37

1

Introduction:

This article illustrates about BHP Billiton group. The BHP Billiton group is the world's

largest mining company. It is also the largest company in Australia by market capitalisation.

It was created in 2001 by the merger of Australia's Broken Hill Proprietary Company (BHP)

and the British-Dutch Billiton. The result is a dual-listed company with head offices in

Melbourne and London. BHP Billiton Limited, which is the majority partner in the dual-

listed structure, is listed on the Australian Securities Exchange. BHP Billiton Plc is listed on

the London Stock Exchange and is a constituent of the FTSE 100 Index. BHP Billiton

Limited and BHP Billiton Plc continue to exist as separate companies, but operate on a

combined basis as BHP Billiton. The headquarters of BHP Billiton Limited, and the global

headquarters of the combined BHP Billiton Group, are located in Melbourne, Australia. BHP

Billiton Plc is located in London, United Kingdom. Both companies have identical boards of

directors and are run by a unified management team. Shareholders in each company have

equivalent economic and voting rights in the BHP Billiton Group as a whole. (BHP Billiton,

2010).

The course work bears a significant importance as it enables a student to become familiar

with the practical business operations. The students under course work get the chance to close

to the people of the real business world and to be familiar within and outer environment of

how an enterprise works in the real business world. Thus it enables a student to develop his

analytical skill and scholastic aptitude. As a student of APDMS of Icon College of

Technology and Management, UK, I took initiative to do my course work under Mining

industry.

1.1 Origin of the Report:

This report is prepared as partial requirement of my course work for the APDMS students of

Icon College of Technology and Management, UK. This study will give me an opportunity to

gather experience how the Financial Management practices is actually operated in an

organization. In order to achieve this objective I have chosen BHP Billiton Group. Basically,

the Purpose of this report is to evaluate the companys performance by doing comparison

with a close competitor and its industry average, non-financial performance of the company.

Furthermore, there are been discussed various investment appraisal method, advantages and

disadvantages of each method and its resources. Information has taken from companys

website, internal papers and different finance related books and websites.


2/37

2

1.2 Objectives:

The result of a study depends upon the proper selection of the objectives. Before starting, it is

essential to set up the objectives and then arrange the total procedures according to the

objectives. I have some objectives about preparing the report.

Broad Objective:

The major objective of the report is to fulfil the requirement of my course work and achieving

academic and practical knowledge, how organizations are managed in real life situation

which I can apply in my future life.

.

Specific Objective:

y To know the historical background of the organization including its mission,objectives and strategies.

y To briefly analyze on the financial practices of BHP Billiton Group.y To the use of financial tools, how effectively developing their services as well as

satisfy customer.

1.3 Methodology:

Sources of data

It is very difficult to collect relevant data from a person other than the regular employees of

the organization because information relating to my topic is restricted to be disclosed without

the approval of the appropriate authority. Thats why I face some problem to prepare this

report.

Primary Sources:

1) Practical desk work.

II) Face to face conversation with the officers.

III) Direct observations.

V) Daily note taken during the course period.


3/37

3

Secondary Sources:

I) Annual reports of BHP Billiton Group.

II) Various books related with the subject.

III) Web sites of BHP Billiton Group.

IV) From Different Files.

V) Half yearly reports of BHP Billiton Group.

1.4 Scope of the Study:

This course work gives me a great scope or opportunity for gather experience and knowledge

in Mining areas by which I can evaluate or expose myself. As my report topic is mainly

focused on Financial Performance, so here I tried to collect how they practice financial tools.

1.5 Limitations:

Nothing is ahead of limitations. The major limitations that I faced during my course work

period are as follows:

y The main constraint of the study was inadequate access to information.y As the officials were busy with their own duty, they could give me little time for the

consultation.

y Time constraint is another important limitation of the report.

2.0 Companys financial performance


4/37

4

What is Ratio Analysis?

The financial statement analysis in which the numerical relationship between two financial

figures of a financial statement is determined is called ratio analysis. In financial statement

analysis, a number of ratios are commonly used in assessing the financial position &

operating performance of the firm.

Key points of Ratios Analysis

y Ratios can be classified into the following four types:

1) Liquidity Ratios measure a firms ability to meet maturing short-term obligations.

Current ratio

Quick (or acid test) ratio

2) Leverage/Finance Ratios measure the extent to which a firm has been financed by debt.

Debt-to-total-assets ratio

Debt-to-equity ratio

Long-term debt-to-equity ratio

3) Activity Ratios measure how effectively a firm is using its resources.

Inventory turnover

Fixed assets turnover

Total assets turnover

Account receivable turnover

Average collection period

4)Profitability Ratios measure managements overall effectiveness as shown by the returns

generated on sales & investment


5/37

5

Gross profit margi

Operati g profit margi

Net profit margi

Ret rn on total assets (ROA)

Ret rn on stockhol ers equit (ROE)

Earnings per share (EPS)

Price-earnings ratios

1. Li i i Rati

Current Rati

2007 2008 2009

1.08:1 1. 1:1 1.9:1

(Please see appendi -1)

Fi

ure-1: Current Rati

ofBH

BLL

T

N

Comments: In year 2007 ratio was 1 to 1.08, in 2008 it was 1 to 1. 1 and in 2009 the ratio

was 1 to 1.9. The ratio is growing gradually every year and this is having more than one.This

increase means that companys current asset is more than current liabilities and it indicates

companys good position.

Qui kRatio/ i Test Ratio

0

0.5

1

1.5

2

2007 2008 2009

1.08

1.31

1.9


6/37

6

2007 2008 2009

0.76 1.01 1. 9


Fiure-2: Qui

kRatio ofBH

B

LL

T

N

Comments: Here the quick ratio ofBHP BILLITON is increasing gradually every year

because of each yearthe currentliabilities changes.

WorkingCapital to Net Assets Ratio

2007 2008 2009

2.8% 1 . 2% 26.65%

(Please see appendi - )

Figure-3: WorkingCapital to Net Assets Ratio ofBH

BLL

T

N

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2007 2008 2009

0.76

1.01

1.49

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2007 2008 2009

2.80%

13.32%

26.65%

Ratio


7/37

7

Comments: For every 100 the company worth is increasing gradually every year.

2. Leverage/Finance Ratio:

Debt-to-total-assets ratio

2007 2008 2009

0.48:1 0.49:1 0.48:1

(Please see appendix-4)

Figure-4:Debt-to-Total-Assets Ratio of B

P BILLITO

Comments: The relationship between debt and total assets is not very high. It is bellow 1

(one). That is well.

Debt to- Equity Ratio

2007 2008 2009

0.95:1 0.96 0.9 5


0.

0.

0.

0.

0.

0.

0.

0.

0.

0.

007 2008 2009

Rati


8/37

8

Figure-5: Debt-to-Euity Ratio ofBH

!B

"LL

"T

#N

Comments: The relationship between debt and owners capitalis not very high. Itis bellow 1

(one). Thatis well.

Long-Term Debt E uity Ratio2007 2008 2009

0.60:1 0.5 :1 0.65:1


Figure-6: Long-Term Debt-to-E$uity Ratio ofBH

%B

&LL

&T

'N

Comments: The relationship between debt and owners capitalis not very high. Itis bellow 1

(one). Thatis well;itis very wellin the year 2008.

3. Acti ity Ratio:

Inventory Turnover Ratio2007 2008 2009

0.95

0.96

0.95

0.944

0.9460.948

0.95

0.952

0.954

0.956

0.958

0.96

0.962

2007 2008 2009

Ratio

0

0.2

0.4

0.6

0.8

20072008 2009

0.60.53

0.65

Ratio


9/37

9

1 :1 11:1 10:1


Figure-7: Inventory Turnover Ratio ofBH(

BILLIT)

N

Comments: Inventory turnover has great capacity to maintain their sales. Within years

theirinventory turnover was high in 2007.

Fixed Assets Turnover2007 2008 2009

1.01:1 1.09:1 0.89:1


Figure-8: Fixed Assets Turnover Ratio ofBH 0 BILLIT 1 N

0

0.2

0.4

0.6

0.8

1

1.2

2007 2008 2009

1.011.09

0.89

Rat2 3

14

11 10

0

2

4

6

8

10

12

14

16

2007 2008 2009

Rat 2 3


10/37

10

Comments: Fi ed assets turnover was decrease in 2009 compare withthe past 2 years

because of high increasing of fi ed assets.

Total Assets Turnover

2007 2008 2009

0.82:1 0.78:1 0.64:1

(Please appendi -9)

Figure-9: Total Assets Turnover Ratio ofBH4

BILLIT5

N

Comments: Total assets turnoveris gradually decreasing because sales decreasing as a result

in 2009 TAT decrease.

Account ReceivableTurnover

0

0.2

0.4

0.6

0.8

1

2007 2008 2009

0.82 0.78

0.64

Rat6 7


11/37

11

2007 2008 2009

8.63:1 5.65:1 8.49:1


Figure-10: Account ReceivableTurnover Ratio ofBH 8 BILLIT 9 N

Comments:Accounts receivable turnover was good in 2008 because of here receivable was

collecting more efficiently.

AverageCollection Period

2007 2008 2009

42 67 43


Figure-11: Average collection period ofBHP BILLIT@

N

0

1

2

3

4

5

6

7

8

9

2007 2008 2009

8A 63

5A65

8A 49

Rat B C

0

10

20

30

40

50

60

70

2007 2008 2009

42

67

43

T B mes


12/37

12

Comments: Here average collection period is fluctuating because varies on accounts

receivable turnover.

4. Profitability Ratio:

Gross Profit Margin

2007 2008 2009

40% 39.5% 23%


Figure-12: Gross Profit Margin Ratio ofBHP BILLITD

N

Comments: In BHP BILLITON perspective, the gross profit margin ratio is decreasing

consistently and in year 2009 it was the lowest which is not good forthe company.

Operating Profit Margin2007 2008 2009

0.41: 1 0.40:1 0.24:1


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

2007 2008 2009

40.00% 39.50%

23.00%

Ratio


13/37

13

Figure-13: Operating Profit Margin Ratio ofBHP BILLITON

Comments: The Companys operating profit margin ratio is decreasing consistently and it

was down in 2009 than othertwo years thatis negative for company.

Net Profit Margin2007 2008 2009

40% 39% 23%


Figure-14: Net Profit Margin Ratio ofBHP BILLITON

0

0.05

0.1

0.15

0.20.25

0.3

0.35

0.4

0.45

2007 2008 2009

0.41 0.4

0.24

RatE F

0

5

10

15

20

25

30

35

40

2007 2008 2009

4039

23

RatE F


14/37

14

Comments: Net profit margin is decreasing consistently and in 2009, it was the lowest

because of netincome down.

Return onTotal Assets (ROA)2007 2008 2009

0.23 0.21 0.07


Figure-15: Return onTotal Assets ofBHP BILLITON

Comments:ROA was decreasing consistently from 2007 to 2009 because of netincome

decreases.

Return on Stock olders E uity (ROE)2007 2008 2009

0.45% 0.42% 0.16%

0

0.05

0.1

0.15

0.2

0.25

2007 2008 2009

0.23

0.21

0.07

Ratio


15/37

15


Figure-16: Return on StockG

olders EHuity ofBHP BILLITON

Earnings per Share (EPS)

2007 2008 2009

229.5 275.3 105.6


Figure-17: Earnings per share ofBHP BILLITON

Comments: Basically it refers earning per share. In the BHP BILLITON perspective it falls

down consistently and in 2009 it falls terribly.

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

2007 2008 2009

0.45%0.42%

0.16% Ratio

0

50

100

150

200

250

300

2007 2008 2009

229.5

275.3

105.6 Ratio


16/37

16

Expenses to Sales Revenue Ratio2007 2008 2009

55.50% 60.49% 76.95%


Figure-18: Expenses to sales Revenue Ratio ofBHP BILLITON

Comments: Expenses to sales Revenue Ratio is increased consistently from 2007 to 2009

and that are why profitis decreased.

19. PriceEarnings Ratio

2007 2008 2009

0.16:1 0.15:1 0.18:1


Figure-19: PriceEarnings Ratio ofBHP BILLITON

0

10

20

30

40

50

60

70

80

2007 2008 2009

55.560.49

76.95

Ratio

0.135

0.14

0.145

0.15

0.155

0.16

0.165

0.17

0.175

0.18

2007 2008 2009

0.16

0.15

0.18

Ratio


17/37

17

Comments: Price earnings ratio is fluctuating over the year because of fluctuating market

price per share.

A. Earnings per share on 2008 are 0.18times, which one is greater than other years.

B. market price was cheaper in 2008 than other two years.

C. high price earnings ratio may mean that the investor has high expectation about

the future economic/earnings prospects of the company.

2.1 Comparison with close competitors:

BHP BILLITONS close competitor is Anglo American Plc. Comparison among them on

year 2009 is as following:

B P BILLITO

(US$M)

Anglo American Plc.

(US$M)

Current Ratio 1.9:1 1.3:1

Acid Test Ratio 1.49 : 1 1.40:1

Net Profit Ratio 23% 20%

Account

Receivable

TurnoverRatio

8.49 7.40

Average

Collection Period

43 38

Inventory

TurnoverRatio

10 : 1 9:1

Equity ratio 0.95 : 1 0.89:1

Earnings per share 105.6 73


18/37

18

Gross Profit

Margin

23% 31%

2.2 Performance ighlights of B P Billiton Group (2003-2008)

The performance of the Group relative to the markets in which it operates over the past five

years is illustrated by the two charts below. The first compares companys TSRperformance

with that of the ASX 100 and the FTSE 100, both of which are broadly-based indices. The

second illustrates performance against the LTIPs peer group index. The Committee believes

that the broadly-based indices and the index of peer group companies are the most

appropriate benchmarks for measuring companys performance. For FY2008, the total return

to BHP Billiton Limited shareholders (as measured by the change in share price plus

dividends reinvested) was 60.72 per cent. Over the same period the total return to BHP

Billiton Plc shareholders (measured on the same basis) was 54.86 per cent. As illustrated by

the charts below, BHP Billiton has strongly outperformed both the market and the pre-2007

LTIP peer group in the level of returns it has delivered to shareholders.

Five-year TSRperformance of BHP Billiton measured against the ASX 100 and FTSE 100

rebased in US$

Five-year TSRperformance of BHP Billiton measured against the LTIP comparator group

rebased in US$


19/37

19

3.0 Various investment appraisal methods, advantages and disadvantages of each

method

Investment Appraisal

A means of assessing whether an investment project is worthwhile or not Investment project could be the purchase of a new PC for a small firm, a new piece of

equipment in a manufacturing plant, a whole new factory, etc

Used in both public and private sector


20/37

20

Diagram: Investment Appraisal Method (www.bized.co.uk)

Types of investment appraisal Accounting Rate ofReturn Payback Period (PP); Net Present Value (NPV) /Discounted cash flow; Internal Rate ofReturn (IRR). Profitability Index (PI)

Accounting Rate of Return (ARR)

The accounting rate of return method takes the average accounting profit that the investment

will generate and expresses it as a percentage of the average investment in the project as

measured in accounting terms. Thus:

ARR= Average annual profit/ Average investment to earn that profit *100%

(Atrill and McLaney, 2004)

Benefits:

y It is easy to calculate.y It focuses profitability.y It takes accounting profit into account.

Limitations:

y It does not take into account time value of money.y It does not take timing value of cash flow.

Paybac Period (PP)

The payback period method seems to go some way to overcoming the timing problem of

ARR, or at least at first glance it does. (Atrill and McLaney, 2004)


21/37

21

Pay back method is the way which recovers the initial investments as quickly as possible. The

benefits and limitation of are as follows:

Benefits:

y It is very simple to calculate.y It seems to be less risky.

Limitations:

y It does not look profitability.y

It does not focus maximizing the shareholder wealth.

y It does not recognize the value of money change overtime.

Net Present Value (NPV)

The Net present value (NPV) method is the classic economic method of evaluating the

investment proposals. It is one of the discounted cash flow (DCF) techniques explicitly

recognizing the time value of money. It correctly postulates that cash flows arising at

different time periods differ in value and are comparable only when their equivalents are

found out. (Pandey, 2002)

Benefits:

yThe use of net cash flows emphasizes the importance of liquidity.

y The time value of money is taken into account.y It takes into accounting time value of money.(Dyson, 2004)y It focuses on profitability.y It gives actual amount.

Limitations:


22/37

22

y It is crucial to select appropriate rate of interest.y Cost of capital is selected to source of finance.

Internal Rate of Return (IRR)

This method is quite closely related to the Net Present Value (NPV) method in that, like

NPV, it is also involves discounting future cash flows. The internal rate of return of a

particular investment is the discount rate that, when applied to its future cash flows, will

produce an NPV of precisely zero. In essence, it represents the yield from the project. (Atrill

and McLaney, 2004)

Benefits:

y IRRis popular because it is straightforward.y It uses cash flows and recognizes the time value of money.y It tells whether an investment increases the firms value.y It considers the risks of future cash flows.

Limitations:y It requires an estimate of the cost of capital in order to make a decision.y It cannot be used in situations in which the sign of the cash flows of a project

change more than once during the project life.

Profitability Inde (PI)

Profitability index is the ratio of the present value of cash inflows, at required rate of return,

to the initial cash outflow of the investment. It may be gross or net; net being simply gross

minus one. The formula to calculate benefit-cost ratio or profitability index is as follows:

PI =PV of Cash inflows/Initial cash outlay (Pandey, 2002)

Benefits

y Tells whether an investment increases the firms valuey Considers all cash flows of the project


23/37

23

y Considers the time value of moneyy Considers the risk of future cash flows (through the cost of capital)y Useful in ranking and selecting projects when capital is rationed.

Limitations

y Requires an estimate of the cost of capital in order to calculate the profitability indexy May not give the correct decision when used to compare mutually exclusive projects.

3.1 Proposal of an investment project

During the current year BHP BILLITON reduced their strategic investments in other related

businesses. In the right circumstances taking strategic investments is valuable for the Group,

and the Board will continue to evaluate opportunities. However, strategic investments

compete with other priorities, including debt reduction, for cash, and it is unlikely that further

significant investments will be made in the short term.

4.0 Various sources of finance available for the investment/company

When considering about the various sources of finance for a business, it is useful to

distinguish between external sources and internal sources of finance. Within each of these

two categories, we can further distinguish between long-term and short-term sources. In the

sections that immediately follow; we consider the various sources of external finance. Wethen go on to consider the various sources of internal finance available.

Ordinary

shares

Preferenceshares

Long-

term

Loans/

Debentures

Leases

Total Finance


24/37

24

Diagram 1.0: Summarises the main sources of long-term and short-term e ternal

finance.

By external sources we mean sources that require the agreement of someone beyond the

directors and managers of the business. Thus, finance from an issue of new shares is an

external source because it requires the compliance of potential shareholders. Retained profit,

on the other hand, is considered an internal source because the directors of the business have

power to retain profits without the agreement of the shareholders, whose profits they are.

Long-term sources of e ternal finance

Long-term sources of finance are defined as sources of finance that are not due for repayment

within one year. As diagram 1.0 reveals, the major forms of long-term finance are:

Ordinary shares; Preference shares; Loans; Lease, that is, finance leases and sale-and- leaseback arrangements.

4.1 Various sources of finance and advantages and disadvantages of each source

including the ris involved

Ordinary shares

Ordinary shares form the backbone of the financial structure of a business. Ordinary share

capital represents the businesss risk capital. There is no fixed rate of dividend, and ordinary

share holders will receive a dividend only if profits available for distribution still remain afterother investors (preference shareholders and lenders) have received their interest or dividend

payments. If the business is wound up, the ordinary shareholders will receive any proceeds

from asset disposals only after lenders and creditors and often, after preference shareholders

have received their entitlements. Because of the high risks associated with this form of

investment, ordinary shareholders will normally require a comparatively high rate of return.

(Atrill, 2004)

Short-term

Debt

factoring

Invoicediscounting

Bank

overdraft


25/37

25

ADVANTAGES OF ORDINARY SHARES

Ordinary shareholders have voting rights.

They hope to receive large dividends.

They expect to receive an annual dividend.

If the company makes high profits they can expect high dividends.

An interim dividend may be paid to shareholders.

DISADVANTAGES OF ORDINARY SHARES

Dividends are not guaranteed.

If profits are low they may not receive any dividend.

They have to give way to preference shareholders who have preferential

Rights to a dividend.

In the event of liquidation of the company they may lost their capital.

(http://www.auchinleckacademy.e-ayr.sch.uk/accounts/Plc3.PDF)

Preference Shares:

Preference shares offer investors a lower level of risk than ordinary shares. Provided there are

sufficient profits available, preference shares will normally be given a fixed rate of dividend

each year and preference dividends will help be paid before ordinary dividends are paid.

Should the business be wound up, preference shareholders may be given priority over the

claims of ordinary shareholders. (Atrill, 2004)

Loans/Debentures

Many businesses rely on loans as well as share capital to finance operations. Lenders willenter into a contract with the business in which the rate of interest dates of interest payments

and capital repayments and security for the loan are clearly stated. In the event that the

interest payments or capital re payments are not made on the due dates, the lender will

usually have the right, under the terms of the contract, to seize the assets on which the loan is

secured and sell them in order to pay the amount outstanding. Security for a loan may take

the form of a fixed charge on particular assets of the business or floating charge on the whole

of its assets. (Atrill, 2004)


26/37

26

Interest rates and deep discount bonds

Interest rates on loan finance may be either floating or fixed. A floating rate means that the

required rate of return from lenders will raise and fall with market rates of interest. A

business may issue redeemable loan capital that offers a rate of interest below the market rate.

In some cases, the loan capital may have a zero rate of interest. Such loans are issued at a

discounted to their redeemable value and are referred to as deep discount bonds. (Atrill,

2004)

Mortgages

A mortgage is a form of loan that is secured on freehold property. Financial institutions such

as banks, insurance businesses and pension funds are often prepared to lend to business on

this basis. The mortgage may be over a long period (20 years or more) (Atrill, 2004)

4.2 Recommendation of the best source of finance

For BHP BILLITON, it is easier for them to source their finance through share and

debenture. They can also raise their capital through loans. But recommended sources of

finance would be issue more share, as the economy is recovering from current turmoil

situation and event there were very low profit in the last year, there is a possibility that the

mining group might gain profit in the current year. As it is evident that they already done so

by offering share with offer Price of 1944 pence per Ordinary Share and Market

Capitalisation of 42.90 billion (http://uk.finance.yahoo.com/q?s=BLT.L)


27/37

27

5.0 References

Atrill and McLaney, (2004),Accounting andFinance for Non-Specialists (4th edn), Prentice

Hall, Essex, UK.

Dyson, J. R. (2004)Accounting for non-accounting students (6th edn), Prentice Hall

Financial Times, Essex, UK

Pandey, (2002),Financial Management(8th

edn), Vikas Publishing House Pvt Ltd, New

Delhi, India.

BHP Billiton (2010), [online], (cited 4 May 2010) Available from Biz/ed [online]

(cited 4 May 2010, 1:10am) Available from >URL: http://www.bized.co.uk/>

Yahoo Finance [online] (cited 12 May 2010), Available from

URL

Available from: URL

[online], (cited14 May 2010)


28/37

28

APPENDIX

1. Current Ratio

ow calculated:

Current Ratio = Current Assets / Current Liabilities

2007

US$M

2008

US$M

2009

US$M

CurrentAssets

11,087 21,680 22,486

CurrentLiabilities

10,249 16,478 11,850

Ratio 1.08:1 1.31:1 1.9:1

Appendix -1: Current Ratio

2. Quic Ratio/Acid Test Ratio

ow calculated:


29/37

29

QuickRatio = Current Assets Inventory / Current Liabilities

2007 2008 2009

Current Assets Inventory

7791 16709 17665

CurrentLiabilities

10249 16478 11850

Ratio 0.76 : 1 1.01 : 1 1.49 : 1

Appendix -2: QuickRatio

3. Wor ing Capital to Net Assets Ratio

ow calculated:

Working Capital to Net Assets Ratio = Current Assets Current Liabilities/Net Assets*100

2007

US$M

2008

US$M

2009

US$M

Current Assets Current

Liabilities

838 5,202 10,850

Net Assets 29,918 39,043 40,711

Ratio 2.8% 13.32% 26.65%

Appendix -3: Working Capital to Net Assets Ratio

4. Leverage Ratio/Finance Ratio

ow calculated:


30/37

30

Debt-to-Total-Assets Ratio = Total Debt / Total Assets

2007

US$M

2008

US$M

2009

US$M

Total Debt 28,250 36,965 38,059

Total Assets 58,168 76,008 78,770

Ratio 0.48 : 1 0.49 : 1 0.48 : 1

Appendix -4: Debt-to-Total-Assets Ratio

5. Debt Equity Ratio

ow calculated:

Debt-to-Equity Ratio = Total Debt / Total Stockholders Equity

2007

US$M

2008

US$M

2009

US$M

Total Debt 28,250 36,965 38,059

Total

Stockholdersequity

29,667 38,335 39,954

Ratio 0.95 : 1 0.96 : 1 0.95 : 1

Appendix -5: Debt-to-Equity Ratio

6. Long-Term Debt Equity Ratio

ow calculated:

Long-Term Debt-to-Equity Ratio = Long-term Debt / Total Stockholders Equity


31/37

31

2007

US$M

2008

US$M

2009

US$M

Long-TermDebt

18,001 20,487 26,209

Total

Stockholders

Equity

29,667 38,335 39,954

Ratio 0.60 : 1 0.53 : 1 0.65 : 1

Appendix -6: Long-Term Debt-to-Equity Ratio

Activity Ratio:

7. Inventory Turnover Ratio

ow calculated:

Sales / Inventory of finished goods

2007

US$M

2008

US$M

2009

US$M

Sales 47,473 59,473 50,211

Inventoryof finished

goods

3,409 5,203 5,021

Ratio 14 : 1 11 : 1 10 : 1

Appendix -7: Inventory TurnoverRatio

8. Fi ed Assets Turnover


32/37

32

How calculated:

FAT= Sales / Fixed Assets

Appendix -8: Fixed Assets TurnoverRatio

9. Total Assets Turnover

How calculated:

TAT= Sales / Total Assets

2007

US$M

2008

US$M

2009

US$M

Sales 47,473 59,473 50,211

Total

Assets

58,168 76,008 78,770

Ratio 0.82 : 1 0.78 : 1 0.64 : 1

Appendix -9: Total Assets TurnoverRatio

10. Account Receivable Turnover

How calculated:

Annual Credit Sales / Accounts receivable

2007

US$M

2008

US$M

2009

US$M

Sales 47,473 59,473 50,211

Fixed Assets 47,081 54,328 56,284

Ratio 1.01 : 1 1.09 : 1 0.89 : 1


33/37

33

Appendix -10: Accounts Receivable TurnoverRatio

11. Average Collection Period

How calculated:

365 Days / Accounts receivable turnover

Appendix -11: Average Collection Period

Profitability Ratio:

12. Gross Profit Margin

2007

US$M

2008

US$M

2009

US$M

AnnualCreditSales

47,473 59,473 50,211

AccountsReceivabl

e

5,499 10,521 5,915

Ratio 8.63 5.65 8.49

2007 2008 2009

365 Days 365 365 365

AccountsReceivabl

e

Turnover

8.63 5.65 8.49

Times 42 67 43


34/37

34

How calculated:

Sales Cost of goods sold / Sales * 100

2007

US$M

2008

US$M

2009

US$M

Sales Costof goods sold

19,103 23,497 11,571

Sales 47,473 59,473 50,211

Ratio 40 % 39.50 % 23%

Appendix -12: Gross Profit Margin Ratio

13. Operating Profit Margin

How calculated:

Operating profit ratio = Earnings before interest and taxes (EBIT) / Sales

2007

US$M

2008

US$M

2009

US$M

EBIT 19,724 24,145 12,160

Sales 47,473 59,473 50,211

Ratio 0.41:1 0.40:1 0.24:1

Appendix -13: Operating Profit Margin Ratio

14. Net Profit Margin

How calculated:

Net Profit Margin = Net Income / Sales * 100


35/37

35

2007

US$M

2008

US$M

2009

US$M

NetIncome

18,948 23,190 11,308

Sales 47,473 59,473 50,211

Ratio 40% 39% 23%

Appendix -14: Net Profit Margin Ratio

15. Return on Total Assets (ROA)

How calculated:

Return on Total Assets (ROA) = Net Income / Total assets

2007

US$M

2008

US$M

2009

US$M

Net

Income

13,496 15,962 6,338

TotalAssets

58,168 76,008 78,770

Ratio 0.23:1 0.21:1 0.07:1

Appendix -15: Return on Total Assets

16. Return on Stoc holders Equity (ROE)


36/37

36

How calculated:

Return on Stockholders Equity (ROE) = Net Income / Total stockholders equity

Appendix -16: Return on Stockholders Equity

17. Earnings per Share (EPS)

2007

US$M

2008

US$M

2009

US$M

EPS 229.5 275.3 105.6

Appendix -17: Earnings per share

18. E penses to Sales Revenue Ratio

How calculated:

Expenses to Sales Revenue Ratio = (Expenses / Sales Revenue) *100

2007

US$M

2008

US$M

2009

US$M

Net Income 13,496 15,962 6,338

TotalStockholde

rs

Equity

29,667 38,335 39,954

Ratio 0.45:1 0.42:1 0.16:1


37/37

Appendix -18: Expenses to Sales Revenue Ratio

19. Price Earnings Ratio

How calculated: Price-Earnings Ratio = Market price per share / Earnings per share

Appendix -19: Price earnings Ratio

2007

US$M

2008

US$M

2009

US$M

Expenses 26,352 35,976 38,640

SalesRevenue

47,473 59,473 50,211

Ratio 55.50% 60.49% 76.95%

2007

Pence

2008

Pence

2009

Pence

Marketprice per

share

37.01 41.14 19.44

EPS 229.5 275.3 105.6

Ratio 0.16:1 0.15:1 0.18:1

Appendix Finance

Documents

Transcript of Appendix Finance