FINANCIAL ANALYSIS 1

Financial analysis

University name

Student name
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Part 1: Firms selection and request for data

The part a and part b are done in the excel sheet

Part 2: Data preparation and cleaning

Statistical analysis is done in excel sheet

Part 3: Financial analysis

With the aid of appropriate graphs and charts, perform a financial analysis of each firm (NB.

using relevant ratios downloaded from Eikon). Your analysis summarises the followings:

(Graphs and charts in excel sheet)

a. profitability

Return of assets and net profit margin are used to measure the profitability of the five companies

during years 2010 to 2019. The results of these ratios show that profitability of companies like

bhp billiton, Rio pinto and paladin energy is decreasing with every passing year. However, the

profitability of companies like Alumina, orocboro is increasing with every passing year.

b. Liquidity

In Financial Accounting, liquidity ratios are essential to determine a company's ability to pay off

its legal debts without raising any external capital. The two most significant liquidity ratios are

the current ratio and quick ratio/ acid-test ratio. A company with higher liquidity quickly

converts its assets into cash and is considered safer for investment.
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The current ratio of a company is computed by dividing current assets, such as cash, inventory,

accounts receivables, etc. with the value of current liabilities.The quick ratio better monitors a

company's liquidity as it measures a firm's ability to pay off its short-term obligations with the

most liquid current assets. total value of current assets minus inventories divided by the current

liabilities.

Current ratio and quick ratio are used to measure the liquidity position of the five companies

during years 2010 to 2019. The results of these ratios show that the liquidity situation of

companies like bhp billiton, Rio pinto and paladin energy is badly affecting with every passing

year. However, the liquidity position of companies like Alumina, orocboro is improving with

every passing year.

c. Solvency

The solvency ratio is calculated to indicate whether a company's cash flow is sufficient to cover

its short-term and long-term liabilities. Companies compute their solvency ratio by dividing the

value of their after-tax net operating income by the value of its total debt obligations.

Interest coverage ratios and debt to equity ratios are used to measure the solvency of the five

companies during years 2010 to 2019. The results of these ratios show that the solvency

situation  of companies like bhp billiton, Rio pinto and paladin energy is bad as compared to

companies like Alumina, orocboro is increasing with every passing year.

d. Financial distress.

The financial position of all the given companies has been affected due to financial distress

caused by Covid-19 and recession 2008.

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Part 4: Regression analysis

a and b are done in excel sheet

b and c Write the regression equation and interpretations using the output from your regression

analysis.

Bhp Billiton

Regression equation = 0-101.87(Debt to equity)-0.004(Return on assets)+0(ESG score)

Alumni

Regression equation = 0-138.218(Debt to equity)-21.23(Return on assets)+0.55(ESG score)

A negative coefficient implies that as the independent variable increases, the dependent variable

manages to decrease

Rio pinto

Regression equation = 0-87.1743(Debt to equity)+0.166(Return on assets)+1.69(ESG score)

A negative coefficient implies that as the independent variable increases, the dependent variable

manages to decrease

Orocobro

Regression equation = 0+74.34(Debt to equity)+13.163(Return on assets)-3.08(ESG score)

A positive coefficient shows that while the value of the independent variable increases, the mean

of the dependent variable also tends to increase.

Paladin energy

Regression equation = 0+7.20(Debt to equity)+0.05(Return on assets)-11.45(ESG score)

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A positive coefficient shows that while the value of the independent variable increases, the mean

of the dependent variable also tends to increase.

Part 5: Creating interactive dashboard in excel

Part 6: Documenting your findings

Executive summary

The purpose of this report is to measure the financial performance of Rio pinto, bhp billiton,

Orocobre, alumina and Palin energy. This analysis has provided the basis for creating investment

strategies for investors. 

Introduction

This report has been used to profitability analysis and regression analysis to analyze the

performance of five given companies. A profitability ratio is a financial measure used by

business analysts and investors to access the company's ability to generate profit in relation with

its turnover, balance sheet assets, operational costs, and the shareholders’ value, during a specific

period. Profitability ratios show how efficiently a company utilizes its assets to attain profit and

value to shareholders. A high profitability ratio means that a company is performing well in

terms of cash flow, profits, and revenue generation. These ratios are most effective when

compared with the previous records of the company or other companies' progress. Regression

analysis is conducted to measure the relationship between different financial variables. 

Discussion

The financial analysis of the firms shows that companies like Paladin energy, Rio pinto

and bhp billiton have to improve their financial performance such as they have increased their

profitability and solvency position. On the other hand, companies like Alumina and Orocobre are
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going good. However, they too need some improvement in controlling their operational

expenses.

Conclusion and recommendations 

The regression analysis and financial analysis suggests that Alumina company is best for

investment due to its strong solvency and profitability performance during 2010 to 2019.