Envirnmental and financial analysis of BHP BILLITON

MSc Strategic Planning and Investment 5156F

(1) Financial consultantas report a 10%

A 2-page right track/wrong track conclusion with highlights of main issues and brief summary of

your recommendations for the company.

(2) Business environment and strategy a 25% (segmental analysis)

General factors impacting the firm: economic, industrial, market structure, segmental structure

of firm. Include economic data and industry trends if available. Frameworks such as Porteras

five forces, the a?Kaya framework and PEST may be useful here. In some instances it will also be

appropriate to consider how regulation and regulatory risk affect your company.

(3) Analysis of company accounts a 25% (segmental analysis)

General analysis of trends and ratios for overall firm: comparison with main competitor(s) and

industry sector data if available. If possible, include management accounting and control issues.

Conduct a financial analysis of individual segments.

(4) Investment performance a 15% (as whole group performance analysis)

An assessment of stock price performance: Jensen, Treynor and T2

(5) Recommendations a 15%

This section should bring together some of the main points (both positive and negative) from

prior sections and develop a set of recommendations regarding the running of the company and

its future activities/direction. Make clear linkages with issues you identified in previous sections.


Useful information:

1. Accounting-based performance measurement (segmental analysis)

(a) Trends in levels (i.e. actual sales, profits)

(b) Trends and cross-sectional analysis of ratios

2. Market price performance

(a) Beta-based measures should be used, e.g. Treynor, Jensen alpha, T-squared, etc.

(b) Limitations of these measurements?

3. Equity valuations (using last 5 years annual reports)

Dividend based a does firm pay dividends? What is long term growth rate (g) a may be

different from recent trends!

4. Discount rate for securities

Equities (CAPM and Beta; bond and equity yields)

5. Credit-worthiness and bankruptcy prediction

(a) Individual ratios (Beaver 1966)

(b) Multivariate models (Altman 1968, Olsen 1980)

(c) Limitations?

(d) Could also look at current ratings from credit agencies (although these should be


6. Segment analysis a detail

(a) Detailed analysis of trends within different segments and relative profitability of each

within the company

(b) Discussion of future trends within each sector or geographic region

(c) Links with strategic decisions