Executive Summary

BHP Group Ltd selected in this Financial Analysis assignment is an Anglo-Australian Company that is into multinational mining. The headquarters of the company is situated in Victoria, Australia. This is traded in the Australian Stock Exchange by the name of BHP. The company was founded in the year of 1885. The revenue of the company is US$43.638 billion. The net income of the company is US$4.823 billion (BHP, 2019). The employees working under the company worldwide is sixty two thousand. The report will provide people information that will help them to analyse the work done by the company and the position of the finance in the market. This will also help them to check whether they can invest their money in the company or not.

Analysis

Interpretation

Net Profit Margin

Current Ratio

The graph provided above provides information about the current ratio of the company BHP Group Ltd. It has been observed that the position of the company is improving as the current assets are increasing at a greater speed than that of the current liabilities (Bhp.com, 2017). The current ratio was 1.44 in the year of 2016, which rose to 1.85 in the year of 2017, which then finally rose to 2.51 in the year of 2018.

Working Capital

The graph provided above provides information about the working capital of BHP Group Ltd. It can be observed that there has been an increase in the working capital of the organisation. This suggests that the company is using the working capital properly.

Debt to Equity Ratio

Asset Turnover Ratio

The graph provided above in this Financial Analysis assignment provides information related to the Asset Turnover Ratio for BHP Group Ltd. There is a rise in the rate of asset turnover, which is a positive thing for the organisation. This suggests that the organisation can use their assets properly in order to increase the profit of the business (Bhp.com, 2018). The ratio was 0.52 in the year of 2016, which then rose to 0.65 in the year of 2017, which then finally rose to 0.78 in the year of 2018.

Non-financial Analysis

The organisation BHP Group Ltd has an incentive plan named Long Term Incentive Plan for their employees. This brings in competitive performance based remuneration for the business. A committee for remuneration is produced for the eligible employees. The structure of incentives changes from time to time. These are essential for the business in order to motivate the employees properly. These are essential for the organisation as these methods help in protecting the interest of the employees. This structure will increase the performance of the employees, as they will be interested to perform well due to the incentives provided by the company. These are essential for the business in order to perform well in the market.

BHP group Ltd is a leading global company in the field of resources. They provide the best values to their customers. Their sustainability puts the safety and health in the first place. They are very much responsible for the environment. They do what is right for the society, which helps them to keep their integrity as well. They respect all the stakeholders that they have, which is another important part of the company.

Conclusion

There are various calculations presented in the Financial Analysis assignment that suggests few things to the shareholders. These are termed as recommendations that will be provided below:

These are essential for the organisation to perform well and these ratios suggest that the investors and shareholders can invest their money in the company without any fear of getting a loss.

The calculations that are provided above shows different kind of ratios that are calculated that are used to analyse the statement of finance of BHP Group Ltd. It is observed that they are unable to control their expenses properly. Other than this, they are in a very good position in order to back their business properly. This will attract all the stakeholders to invest their parts in the business. These are essential for the organisation to perform.

References

BHP. (2016).  BHP | 2016 Annual Reporting suite. Retrieved 1 October 2019, from https://www.bhp.com/media-and-insights/reports-and-presentations/2016/09/2016-annual-reporting-suite

BHP. (2019).  BHP | A leading global resources company. Retrieved 1 October 2019, from https://www.bhp.com/

Bhp.com. (2017).  Retrieved 1 October 2019, from https://www.bhp.com/-/media/documents/investors/annual-reports/2017/bhpannualreport2017.pdf

Bhp.com. (2018).  Retrieved 1 October 2019, from https://www.bhp.com/-/media/documents/investors/annual-reports/2018/bhpannualreport2018.pdf

Answer
This Financial Assignment focuses on a highly debated question relating to airline accident victim compensation. The assignment investigated who is responsible for compensating airline accident victims as well as which family members are entitled to receiving compensation. Airlines Accidents tend to claim the smallest number of human lives as compared to other forms of transport but they also tend to be the most high profile and intensely covered by Media. Airline accidents also award higher compensation to the victims and their families as compared to other modes of transport. This has raised controversy regarding whether airline accident victim families are entitled to compensation for the accidents and the amount of compensation they should be awarded (Wang, Hofer, & Dresner, 2013). To better understand the situation, we would break down the scenario on this Financial Assignment into two sections and discuss each section individually before bringing together the findings to deliver a final verdict.

Who is Responsible for Causing Airline Accidents?
An accident is defined as an unplanned event leading to disaster, injury or death; they are not planned for thus classified as Accidents. Either way, airline accidents are closely investigated to determine the cause of the accident, due to air travel accidents being classified as high profile and attracting a lot of attention (Liou, Yen, & Tzeng, 2008). While performing research for this Financial Assignment it was identified that recent years have registered a rising number of smaller airlines and commuter flights which have also led to more accidents but few of the smaller aircraft accidents are covered by the media. It has also led to commuter and small airline accident compensation is less than that awarded by international commercial airlines. The Financial Assignment clearly identified there is a certain level of bias towards airline accident coverage and compensation which is a serious concern that must be addressed.

Who should be held responsible for airline accidents?
To understand guilty and faulty parties the Financial Assignment research identifies it as being important to first perform an in-depth investigation to identify the cause of the accident. Only after the investigation has been completed should the responsible parties be held accountable and made to pay compensation to the airline as well as the accident victims. Causes of airline accidents could include one or more of the following factors: pilot error, equipment failure, violations of FAA regulations and guidelines, aircraft structure and design failure, Flight Service Station employee negligence, Air traffic Controller Negligence & Terrorism (Szeremeta, Janica, Niemcunowicz-Janica, & Pepinski, 2013).

Each of the above reasons and factors identified on the Financial Assignment can result in causing an airline accident thus requiring each factor to be investigated and thoroughly assessed to determine the airline accidents cause. After the cause of the accident has been identified, responsible departments and personnel can be questioned for the accident and the appropriate action is taken (Dupont, Martensen, Papadimitriou, & Yannis, 2010). In certain situation, the cause of an airline accident is associated with terrorism thus making it important for airline compensation to be an independent entity which does not expect compensation from the responsible parties. Doing this would result in seriously hampering airline accident victim compensation since it’s not always possible to secure compensation from the parties responsible for causing an accident. This Financial Assignment also identified non formal causes such as terrorism which may result in air crashes thus raising a question to who would be liable to make compensations for such airline crashes (Goldman, 2010).

Should Families Of Airline Victims Be Entitled To Compensation?
This Financial Assignment classifies Airline Accident compensation as being as important as any other form of accident compensation and must be awarded to the victim’s next of kin or family (Spearing, Connelly, Gargett, & Sterling, 2012). For a bystander awarding accident compensation to family members and next of kin may seem unfair since they receive financial benefits from an accident or a person’s death. But it’s not as simple as many people think since there is a process which is followed to claim the airline accident compensation. The compensation claiming process usually involves consulting the beneficiaries and other close family members who are directly linked to caring for the victim’s dependents.

As per research performed during this Financial Assignment, accident compensation is meant to provide financial relief to dependents who may have relied on the victim to support their daily needs and expenses (Thakor, 2012). The accident would leave the family and dependents extremely venerable thus making it important for the family to receive financial compensation for injuries or death which could have occurred as a result of an airline accident. Airline accident compensation is similar to car accident compensation thus it’s not fair to consider questioning airline accident compensation rights just due to air travel compensation being higher. To understand the underlying factors associated to compensation amounts, the Financial Assignment will consider important factors such as the frequency & risk rate, survival rate and insurance premiums charged by airline and car insurance companies (Kim, Rhie, Yoon, Kim, & Won, 2012). Each mode of transport and its insurance policies are very different from the other and result in different amounts of compensation being awarded to the accident victims and their families.

Accident frequency and risk assessment methods used on this Financial Assignment
The main factors linked to determining the different compensation rate offered by airline and car accidents is accident frequency and risk. Although airlines attract more fear among travellers due to the “near-zero” airline accident survival rate, air travel is considered to be the safest mode of transport (Baker, 2010). The Financial Assignment research also identified Road transport as classified as the riskiest mode of transport which results in millions of accidents, injuries and deaths each year. This results in making road transport accident compensation less than air travel due to road transport having a higher accident probability and lower insurance coverage and compensation rates.

Survival Rate effects the Insurance Premium Rate
Air travel also offers a lower survival rate compared to road transport due to aircraft travelling at a high altitude which results in most crash-landing being fatal. Road transport accidents are more common but pose a lower risk of death as compared to air travel (Bolderdijk, Knockaert, Steg, & Verhoef, 2011). Due to air travel having a higher fatality rate, air travel insurance is also considerably higher and charged per flight as compared to road transport insurance which is usually an annual premium policy. This results in Air travel insurance compensation rates being much higher than other forms of transport discussed on this Financial Assignment.

Conclusion
The Financial Assignment also correlated the number of travellers to increasing accidents. As the number of people travelling by air increases, it’s only natural to see more air travel accidents occurring in the future (Barros, Faria, & Gil-Alana, 2010). Airline accidents could be caused by several factors and travel accidents can continue to be expected in the future. There are several aviation bodies associated with investigating airline accidents and they usually hold the responsible people to task. Compensation must also continue being awarded to the survivors, beneficiaries and close family members since this compensation helps reduce the financial strain on a victim’s dependents. This allows for accident victim dependents to receive the required financial protection while they recuperate from the loss. The amount of compensation awarded will usually depend on the type of accident insurance policies a person buys. To conclude the Financial Assignment it is identified that the higher the cost of the accident insurance policy the higher compensation one can expect, making it the choice the insured individuals needs to considered while selecting their insurance coverage policies.

Bibliography
Baker, J. (2010). Fear of flying. Rural Society, Financial Assignment  20, 21–34. DOI:10.1016/B978-0-323-03453-1.10035-5

Barros, C. P., Faria, J. R., & Gil-Alana, L. A. (2010). Persistence of airline accidents. Disasters, 34, 1123–1138. DOI:10.1111/j.1467-7717.2010.01186.x

Bolderdijk, J. W., Knockaert, J., Steg, E. M., & Verhoef, E. T. (2011). Effects of Pay-As-You-Drive vehicle insurance on young drivers' speed choice: Results of a Dutch field experiment. Accident Analysis and Prevention, 43, 1181–1186. DOI:10.1016/j.aap.2010.12.032

Dupont, E., Martensen, H., Papadimitriou, E., & Yannis, G. (2010). Risk and protection factors in fatal accidents. Accident Analysis and Prevention, 42, 645–653. DOI:10.1016/j.aap.2009.10.011

Goldman, O. (2010). The Globalization of Terror Attacks. Terrorism and Political Violence. DOI:10.1080/09546553.2010.514776

Kim, I., Rhie, J., Yoon, J. D., Kim, J., & Won, J. (2012). Current situation and issue of industrial accident compensation insurance. Journal of Korean Medical Science, 27. DOI:10.3346/jkms.2012.27.S.S47

Liou, J. J. H., Yen, L., & Tzeng, G. H. (2008). Building an effective safety management system for airlines. Journal of Air Transport Management, 14, 20–26. DOI:10.1016/j.jairtraman.2007.10.002

Spearing, N. M., Connelly, L. B., Gargett, S., & Sterling, M. (2012). Does injury compensation lead to worse health after whiplash? A systematic review. Pain. Financial Assignment  DOI:10.1016/j.pain.2012.03.007

Szeremeta, M., Janica, J. R., Niemcunowicz-Janica, A., & Pepinski, W. (2013). Fatal drowning as a result of an aeroplane crash-Case report. Forensic Science International, 226. DOI:10.1016/j.forsciint.2012.12.004

Thakor, A. V. (2012). Incentives to innovate and financial crises. Journal of Financial Economics, 103, 130–148. DOI:10.1016/j.jfineco.2011.03.026

Wang, Z., Hofer, C., & Dresner, M. E. (2013). Financial condition, safety investment and accident propensity in the US airline industry: A structural analysis. Transportation Research Part E: Logistics and Transportation Review, 49, 24–32. DOI:10.1016/j.tre.2012.07.001

Task:
Question 1
This question relates to material covered ¡n the Topics 1 to 3. This question addresses the 5th and 6th subject learning outcomes. A thorough understanding of financial mathematics forms the basis of all/earning in this subject.

For the following numerical problems, detailed worked answers must be shown. This involves providing a brief description of the problem, formulae used, progressive and final answers. For assignments you are expected to show your workings using the appropriate formula entered using the MS Word formula function.

(a) Your daughter has expressed a wish to attend university when she finishes school in five (5) years. You anticipate the cost will be $60,000 at the time she commences university. If your financial institution is offering you 4% pa (compounded monthly), how much do you need to deposit ¡n your account each month in order to save the required amount before your daughter commences university?

(b) You have been offered the opportunity to purchase a start up company building electric cars for the Australian market called Green Motors P/L. Your initial investment is $22,000,000. The term of the project is 5 years. The project has an expected rate of return of 10% pa. All expected cash flows for the project are below and you have an expected rate of return of 10% pa.

(i) Based on your required rate of return would you purchase this investment? Present all calculations to support your answer.

(ii) Would you change your opinion from (i) if the expected rate of return rose to 15%? Present all calculations to support your answer.

(c) You have commenced work as a certified Financial Planner. Your supervisor has provided the following financial data for a new client Brant Jerome. The client turned 34 years old today and plans to retire when she turns 67. The client owns a diversified share portfolio which is valued today at $47,000. It is expected that this portfolio will earn (on average) 7% per annum indefinitely. Brant also has a superannuation account with a balance of $78,000 to which he currently contributes $1,000 per month. The superannuation account is expected to continue to earn 8% per annum. At his retirement your client plans to consolidate his financial holdings and purchase a monthly annuity as a pension to fund his planned lifestyle. Brant believes he will need to self-fund his retirement until he reaches the age of 85 at which time he would like to have $120,000 remaining to fund any costs not covered by the age pension. During the pension phase of his retirement Brant will adopt a Balanced investment strategy which will return 5% pa (compounded monthly) on his annuity investment.

(i) What will be the value of Brant’s financial assets when he retires at age 67? Present all calculations to support your answer.

(ii) What will be the monthly pension amount that Brant will receive on his retirement? Present all calculations to support your answer.

QuestIon 2
This question relates to material covered in Topic 1 particularly the Australian taxation system and interest rates. This question addresses the 1st, 2nd, 3rd and 4th subject

learning outcomes.
Students are expected to conduct their own research and develop their own opinions about the merits of this topic. There ¡s no single correct answer and students will be marked on the depth of their research, the quality of their arguments (for and against), and their demonstrated understanding of the issues involved in this complex area of financial policy. Please refer to the instructions regarding referencing and the risks of plagiarism in the assignment submission instructions.

(a) James is applying for a new home loan. He wishes to borrow $250.000 and make his repayments monthly. The interest rate the bank has quoted him is 4% per annum.

(b) The Reserve Bank of Australia has announced a 0.25% decrease in the cash rate. What effects does this have on the economy and the financial markets? Provide examples of who might benefit from this decrease and those that do not.

Question 3
(a) Bradley hates taking risk with his money; ‘1 hate shares and property, I know a lot of people who have lost money in those investments. As a result he will only considerbank guaranteed investments. Bank guaranteed investments are returning 1%. Bradley has a marginal tax rate of 32.5% and pays medicare levy of 2%.

i. Assuming he pays tax at 32.5% plus medicare levy, on the income from his investment, is he preserving the real dollar value of his investment if inflation is 2.5% per annum? Show your workings to justify your answer.

ii. When considering your calculations, how would you explain the benefits of risk to Bradley?

(b) Explain the Australian dividend imputation credit system and how it applies in Australia. Include an analysis of how the receipt of franking credits will result in differing returns for Australian resident and international investors.

(c) Below is the monthly share price data for A2 Milk Company for the 2018 financial year (source: https://au.finance.yahoo.com/quote/A2M.AX/). Note: no dividends were declared for the 2017-18 FY.

i. Calculate the 2017-2018 monthly holding period returns (in both $ and %) for A2M.

ii. Calculate the average monthly return (%) for A2M.

iii. Using the data provided calculate the annual holding period return (in both $ and % terms) for an international (non-Australian) shareholder of A2M.

(d) The monthly data for the Australian All Ordinaries share price index (Source: https://au.finance.yahoo.com/ is below.

i.Calculate the monthly holding period returns (%) for the Australian share market (MKT) during 2017-2018 FY.

ii. Calculate the average monthly holding period return (%) for the MKT (ALL ORDS).

iii. Calculate the annual holding period return (in % terms) for the Australian share market (MKT) (as proxied by the All Ords index) during 2017-2018 FY.

iv. Using Excel (XL) prepare a line graph comparing the monthly returns for A2M and the return on the Australian (MKT).

v. Calculate the risk for 2018 as measured by standard deviation of both A2M and the MKT.

vi. According to Reuters Finance A2M Ltd has a Beta of 1 .04. In terms of share investment, define what Beta represents. What does A2M’s Beta of 1 .04 mean? How risky is it?

vii. The average return on the market (MKT) in Australia for the past 10 years has been 9.55% (Source: https://www.asx.com.au). The yield on Australian 10 year treasury bonds is currently 2.29%. Using these as proxies for the Return on Market (MKT) and Risk Free Rate (RO, combine them with the A2M Beta (above) and calculate the return expected for A2M using the Capital Asset Pricing Model (CAPM).

viii. Using the CAPM data from the previous question create an XL scatter plot graph to plot the Security Market Line (SML) using the Risk Free Rate, Return on Market, and A2M as data points.

ix. Recreate the graph from (viii) above but this time also include the actual 2018 returns for A2M and the MKT as previously found (using the same beta measures).

x. Based on your CAPM findings construct a portfolio made up of 40% A2M and 60% MKT. Calculate the estimated return and for this portfolio.

Answer

Question 1
(a)

(b)

(i) Based on your required rate of return would you purchase this investment.

(ii) Would you change your opinion from ( i ) if the expected rate of return rose to15%?

Hence, he will receive an amount of $ 2475 per month till 85 years of age.