Instruments and Markets Essay Example | Topics and Well Written Essays - 500 words

Instruments and Markets - Essay Example A company needs to be able to meet its current liabilities using its current asset for it to be operational. Companies have short term liabilities that need to be paid and also long term liabilities due (Vandyck, 2006).Therefore the BHP Company has a current ratio of 0.97 which implies that the current asset and the current liabilities almost cancel out. This is a safe cash flow position that shows the firm can adequately service its obligation The company’s level of efficiency in terms of return on assets stood at 9.44% while the Return on equity was 15.92%. These ratios give the efficiency at which the company’s resources were used to achieve the various results and how effective they were. The debt to equity ratio gives the distribution of the capital structure in terms of how much is contributed by stock and how much by debt. A high debt to equity ratio would mean a company is heavily dependent on debt and hence plenty of its future profits would be tied down and there would be less flexibility. A debt to equity ratio of almost 50% shows the two sources of capital are evenly