Financial Analysis: EBITDA Enterprise Essay

Question:

Discuss about the Financial Analysis for EBITDA Enterprise.

Answer:

To decide on the issue of investing in BHP Billitron in Australia, some homework is necessary analyzing the relevant investment ratios which are helpful to infer about the viability of investing in the company (Glakas, 2011).

Price Ratios:

Valuation

P/E Current

-13.7

P/E Ratio (with extraordinary items)

-13.6

Price to Sales Ratio

2.34

Price to Book Ratio

1.36

Price to Cash Flow Ratio

6.8

Enterprise Value to EBITDA

9.89

Enterprise Value to Sales

3.65

Total Debt to Enterprise Value

0.34

The above table showed price ratios of BHP Billitron Ltd as on 30.06.2016. There are positive trend showed in price to sales ratio, book ratio, cash flow ratio, enterprise value to EBITDA, enterprise value to sales ratio and total debt to enterprise value which is significant for investing in the company share. The negative impact showed in price to earning ratio- both in current and with extraordinary items which is due to revenue loss in 2016 F Y. the analysis encourages the investment probability on the company (Marketwatch, 2016).

Profitability Analysis:

Profitability

Gross Margin

17.88

Operating Margin

7.86

Pretax Margin

-16.68

Net Margin

-20.66

Return on Assets

-5.45

Return on Equity

-11.16

Return on Total Capital

-7.11

Return on Invested Capital

-7.4

The above analysis showed negative impact on the elements of pretax margin, net margin, return on assets, return on equity return on total capital and return on invested capital but had shown positive impact on gross and operating margin. The negativity of the analysis may discourage the investment criterion while the positivity also draws the investors with positive mind (Marketwatch, 2016).

Capital Structure:

Capital Structure

Total Debt to Total Equity

67.09

Total Debt to Total Capital

40.15

Total Debt to Total Assets

30.62

Long-Term Debt to Equity

58.52

Long-Term Debt to Total Capital

35.02

The above analysis showed the financial health of the company in respect of Debt. All the elements namely total debt to total equity, total capital, total assets and long term debt to equity and total capital showed as positive and below 100% which means the company has covered its debt well by the capital and assets and thus it is secured as on date so far debts are concerned. This is good feedback for investors so far fresh investment is considered (Marketwatch, 2016).

Liquidity Ratio:

Liquidity

Current Ratio

1.44

Quick Ratio

1.16

Cash Ratio

0.85

The above liquidity ratio showed positive impact on the fields of current ratio, quick ratio and cash ratio. The positivity of the liquidity ratio showed the good financial health of the company which is encouraging for the new investors (Marketwatch, 2016).

Recommendation:

With the above analysis, it can be inferred that the present ratios on price, profitability, liquidity and capital structure can encourage the new investors with their element wise positive impacts. The negative impact showed under different elements in the form P/E current and P/E ration with extraordinary items along with profitability ratios except gross and operating margin projects the imbalances of the company but it is temporary as the company is dealing in the most profitable business globally (Bhpbilliton, 2016).

References:

Bhpbilliton. (2016). Integrity Resilience Growth Annual Report . Retrieved October 18, 2016, from Bhpbilliton:

Glakas, S. (2011, July 01). 15 Financial Ratios Every Investor Should Use. Retrieved October 18, 2016, from investinganswers:

Marketwatch. (2016). Bhp Billiton Ltd. Retrieved October 18, 2016, from Marketwatch:

Marketwatch. (2016). Bhp Billiton Ltd. Retrieved October 18, 2016, from Marketwatch:

Marketwatch. (2016). Bhp Billiton Ltd. Retrieved October 18, 2016, from Marketwatch:

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