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The report discusses about BHP Group Limited which is a leading company in the mining and natural resources sector, excels at commodity commodities such as copper, nickel and potash. How the company could get through the external challenges like the fluctuating commodity prices as well as the geopolitical risks. This conservative debt policy of BHP has enabled the company to retain a strong balance sheet with good credit ratings. BHP has the operational excellence and the strategic investments in high growth sectors to make the company grow sustainably. In analysing BHP’s past financial position, future growth over the next 5 years and its financing strategy, this report will be under taken. Revenues and EBITDA are projected to grow steadily based on financial numbers from FY2023 and FY2024. Nevertheless, profitability may be affected due to external shocks as for example tariffs, market volatility. BHP should concentrate on liquidating costs and relying on the internal reserves for financing. On the other hand, before entering into any additional debt, the company has to be wary. BHP has a strong financial base and a forward viewing strategy that positions the company well to face the market challenges and to capitalise on long term growth opportunities. If you're seeking expert guidance on topics like this, our Finance Assignment Help service can assist you in mastering complex financial analysis with ease.
Debt management is one of the major strategic objectives of firms that determine the capacity in financing operations. There are various conditions relating to both internal financial structure and external market environment that influences the debt policy of any firm. Below are the key determinants:
The conservative tax policy of BHP Group Limited achieves the ideal balance of debt with cash flows and capital requirements to fulfil financial flexibility. BHP has a moderate approach to debt as it borrows only when it is favourable, thus lowering the cost of debt without leaving enough liquidity to fund investments and shareholder returns (Nurdiansari et al., 2022).
It employs this strategic debt management so BHP can fund its growth, enjoy stability and quality of shareholder value (Lee, 2020).
In order to find out whether BHP Group Limitedâs current debt is optimal and whether it should borrow more or pay off its debt; there are many financial factors that should be looked into based on the current company finances and conditions as well as project for next five years.
BHP is projected to develop moderate but stable revenue and EBITDA growth rates in the next 5 years based on the projected rates of revenue (3.51%) and EBITDA (1.79%) deriving from BHPâs financial performance in FY 2023 and FY 2024. Based on the assumption that the company will remain operational efficient, keep costs in check, and continue its strategic investments for growth in areas such as copper, nickel, and potash, these projections are generated.
BHPâs financial data, in particular revenue and EBITDA, suggests that the company is able to hold a conservative debt structure and that the cash flows are sufficient to support its obligations (Maynard, 2017). Overall, the financial condition of the company, its ability to service debt, will be based on such of external factors as commodity price fluctuations, operational risks and macroeconomic conditions.
BHPâs debt policy is conservative and is aimed at ensuring a good credit rating and liquidity position. That being said, this follows the trade-off theory of capital structure that seeks to reconcile the tax advantage of debt versus the costs of financial distress (Vernimmen Quiry, and Le Fur, 2022). BHP can comfortably service its current debtor with stable projected revenues and EBITDA growth.
Still, there are many factors involved when it comes down to whether BHP should increase the amount it is borrowing or whether to pay off debt.
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The firm need to consider the optimal funding mix from the standpoint of its capital structure, risk profile, and growth objectives.
BHP has a strong cash flow and a conservative debt policy so using internal reserves or a combination of debt and reserves is likely the most efficient method taking into account risk.
BHPâs financing policy should be adjusted to stabilize the operations that will impact on the finances of the organization.
                     Figure 2 BHP Group Ltd. (I Month Prices)
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To summarize, BHPâs financing policy should restrict its financing to the internal liquidity and costs management to minimize unnecessary debt accumulation (Tamba et al., 2025).
In the above report, there has been discussion about the BHP Group Limited's financial performance, growth projections, and debt policy combination indicates that, based on the BHP group performance the company is ready for any prevailing external issues which may hold the company back in its growth. Further, there is discussion about the company's long term prospects and its commitment to strategic investments in high growth sectors, copper and nickel, are its recent activities. Revenue and EBITDA are projected to grow steadily in the next five years. But BHP will have keep a careful eye on its debt levels, being aware that, alarmingly, external shocks like a 25% tariff could damage cash flows and threaten profitability. Considering we firmly believe it is less likely to successfully market equity than internal reserves, BHP needs to strengthen its financing strategy on internal reserves and low cost debt when needed. In the face of external shocks, the company should respond in priority to the management of the costs, liquidity preservation and the preservation of flexibility financial so able to respond to the changes in the market. Overall, BHP is in a strong position overall in terms of its financial foundation and strategic growth plans in this regard.
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Brealey, R.A., Myers, S.C. and Marcus, A.J. (2023). Fundamentals of corporate finance. thuvienso.hoasen.edu.vn. McGraw-Hill.
Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. and Maxfield, J., (2024). Financial accounting. John Wiley & Sons.
Lee, T. A. (2020). Financial accounting theory. In The Routledge companion to accounting history (pp. 159-184). Routledge.
Maynard, J. (2017). Financial accounting, reporting, and analysis. Oxford University Press.
Nurdiansari, R., Sriwahyuni, A., Apriani, R. and Fadhilah, N.H.K. (2022). The Effect of Dividend Policy, Debt Policy, and Asset Growth on Firm Value with Managerial Ownership as Moderating Variables. [online] www.atlantis-press.com. doi: https://doi.org/10.2991/aebmr.k.220204.011.
Revsine, L., Collins, D.W. and Johnson, W.B. (2021). Financial reporting & analysis. thuvienso.hoasen.edu.vn. McGraw-Hill.
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Sukmawardini, D. and Ardiansari, A. (2018). The Influence of Institutional Ownership, Profitability, Liquidity, Dividend Policy, Debt Policy on Firm Value. Management Analysis Journal, [online] 7(2), pp.211â222. doi: https://doi.org/10.15294/maj.v7i2.24878.
Tamba, R.R., Tsamara Nayla Safitri, Panjaitan, G.O., Athaya, N.S. and Azzahra, A.S. (2025). The Impact of Debt Policy, Profitability, and Company Size on Firm Value. International Journal of Economic Research and Financial Accounting, [online] 3(2). doi: https://doi.org/10.55227/ijerfa.v3i2.260.
Vernimmen, P., Quiry, P. and Le Fur, Y., (2022). Corporate finance: theory and practice. John Wiley & Sons.
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