BHP Billiton is one of the largest diversified mining and natural resources companies in the world. According to the data provided by Google Finance, BHP is worth nearly $174 billion as of September 4, 2009 (see bibliography, BHP Billiton (ADR), Google Finance). The revenues earned by the group in the fiscal year ending June 2009 BHPre more than $50 billion (see bibliography, BHP Billiton Fundamentals, LondonStockExchange.com), which is higher than the latest GDP estimates of at least 115 countries in the world (see bibliography, The World Factbook Field Listing: GDP (official exchange rate), CIA). The company was formed by a merger betBHPen BHP and Billiton in 2001. The merged enterprise is a diversified natural resources company, which has businesses producing alumina and aluminum, copper, energy (thermal) coal, iron ore, nickel, manganese, metallurgical coal, oil and gas and uranium, as BHPll as gold, zinc, lead, silver and diamonds. BHP Billiton is listed on various exchanges around the world including London Stock Exchange, Australian Securities Exchange and New York Stock Exchange. Rio Tinto Plc (or simply RIO) is another diversified natural resources company based in both United Kingdom and Australia. The company is nearly worth $72 billion (see bibliography, Rio Tinto plc (ADR), Google Finance) and is a major rival of BHP Billiton. Comparison of both BHP and RIO will make this research work interesting as both the companies mine the same resources using cutting edge technology. The financial analysis of both the companies will deal with different areas of performance and position, like Profitability, Liquidity, Financial Risk and Investment. To make things more understandable, I will also perform a brief analysis on the economic environment in which both my research subjects operate and conduct business. This will help me to examine the common challenges faced by both enterprises and will give a clearer picture of their position and performance.
2>Overview of Economic Environment
According to the latest estimates by the US based Central Intelligence Agency (CIA), United Kingdom (the home of BHP Billiton) is the 8th largest economy in the world with a GDP of US$ 2.226 trillion in 2008 (see bibliography: The World Factbook Field Listing: GDP (official exchange rate), CIA). Over the past few decades, the British government privatized many companies and reduced public ownership. This stimulated the economic growth process. Britain once had large oil and gas reserves, which helped to fuel up the economic process. However, it became a net importer of energy resources in 2005, becoming dependent on Middle Eastern countries for oil supplies. The strength of the British economy now comes from a highly sophisticated services sector, specially banking, insurance and business services. This sector now contributes greatly to the GDP, whereas the industries are declining in importance. Despite the highly sophisticated economic structure, the British economy fell prey to the global liquidity crisis which emerged in the second half of 2007. It all started in the US securitized subprime mortgage market, which crashed as a result of high foreclosure rate and declining housing sector. The effects of crashing US economy were very strongly felt in UK as well, mainly due to the reason that the economies of both US and UK were highly integrated. Many British investment corporations held large stakes in the US stock markets as well as in securitized mortgage markets. Declining asset prices in the US led to large write-downs in the balance sheets of British corporations as well. The economy fell into recession in the second half of 2008, after a number of well-known companies going bankrupt (see bibliography: Monaghan, Angela (2009) UK recession: it's official but will it be the worst?). The government took prompt actions by adjusting the monetary policy and nationalizing the banking...
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