Finance and Accounting: Analysis of BP

Finance and Accounting: Analysis of BP Essay example
Masters
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Finance & Accounting
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British Petroleum - BP is a UK based oil exploration and mining firm with operations across the world. It is listed among the top 10 FTSE 100 firms and in 2012; it had revenues of 388.285 billion USD and employed 85,700 people. …

Introduction

The main products are petroleum, natural gas, motor fuels, aviation fuels, petrochemicals and it has activities in the upstream and downstream areas. BP operates on more than 80 nations and its average production is 3.3 million barrels of crude per day, a volume that places it at the front ranks of oil producers in the world. In 2010, BP had a loss of -3.719 million USD and this was due to the huge losses incurred in the Gulf of Mexico spills and the penalty/ expenses the firm had to bear. In 2011, thanks to an increasing crude price, profits increased to 25,700 million USD but in 2012, the profits dipped to 11,583 million USD. Reduction was mainly due to increased costs of acquiring new wells in South East Asia (Annual Reports, 2013).
Financial structure also called as the capital structure refers to the mixture of long-term debt of a firm and its equity that it uses to provide funding for its operations (Elliott and Elliott, 2013). The mix is important since it affects the viability, risk holding and valuation of a business. An analysis helps the finance manager to assess the amount of funds that must be borrowed and the optimum mix of debt and equity that must be maintained. If the funds are expensive and this means that the cost of interest burden is high, then the firm can consider obtaining lesser expensive funds. In any case, financial structure is determined and calculated by values for leverage/ gearing, working cash and capital flow management and the dividend policy. In this paper, the theory behind these factors if first discussed and then calculated for BP for the years 2012-2010. ...
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