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Contents
Executive summary:........................................................................................................................3
Part 1................................................................................................................................................4
Introduction......................................................................................................................................4
1.Revenue Trends and Market Dynamics....................................................................................5
2.Cost Management and Operational Efficiency.........................................................................6
Operating Incomes...................................................................................................................7
Net Income Trends...................................................................................................................7
Profitability Ratios...................................................................................................................7
6. Efficiency Analysis..................................................................................................................7
Asset Turnover Ratios:............................................................................................................7
Summary of Main Findings:....................................................................................................8
PART B..........................................................................................................................................10
Part 2: Critical Evaluation of Costing Systems in Production Planning.......................................10
1. Introduction................................................................................................................................10
2. Discussion..................................................................................................................................10
3. Conclusion.................................................................................................................................12
Appendices....................................................................................................................................13
Appendix A: Detailed Financial Ratios and Calculations.............................................................13
Appendix B: Anglo American PLC and Glencore PLC Financial Statements..............................14
Executive summary:

The report is a comparative financial analysis of Anglo American and Glencore PLC, for the

years ranging from 2021 to 2023, which will focus on profitability, efficiency, and

liquidity. Anglo American revenue investors shirked from $41,554 million in 2022 to $30,652

million in 2023 due to poor global sales of some metals. Glencore experienced a rather sharper

variance in its revenue while still retaining a higher margin due to its unsurpassed diversification

and segmented interest. In case of Anglo American profits had not been affected as such but were

pressed by high cost growth. Glencore switched channels, yielding more profits in terms of high-

yield market in 2022. Anglo American was slower in terms of risk and consistent with indicators

of liquidity that ensure the availability of financial while Glencore was affected by the

conflicting recruitment and financing strategies. Thus, the two companies displayed a distinct

financial strategy of Glencore carrying a high risk and return, while Anglo American had a
balanced one. Both companies need to focus on the integration of new measures driven by the

economic and market factors that are incorporated if they are to achieve a sustainable position in

the volatile global commodities market.

Part 1

Introduction

Anglo American and Glencore PLC are key companies of the international mining and

commodities markets. Those companies have created different roles that are similar to their

diversified reach, innovative marketing strategies, and huge impacts on the global commodity

market. Here is a brief overview of their trajectory that spans over more than three decades and

an analysis of how the recent global economic conditions and the dips in the stock price have

impacted their strategy and the financial results.

Anglo American is a prestigious mining player, has been in the industry since 1917. Anglo

American is headquartered in London, UK, and its operations have stretched over most of the

continents such as Africa, Asia, Australasia, Europe, North America and South America. The

organization is widely known for diamond, platinum, copper and other precious metals mining,

having strong presence in the South Africa where it is a major player in these commodities

production. Anglo American's attitude towards mining demonstrates a strong concern for

preserving the environment and adopting ethical principles. It consistently takes measures

targeting minimizing its footprint in the environment and improving conditions of the
communities it operates within. However, that is not everything the corporations can do as they

are also responsible for social license of operate and societal compliance.

Glencore came about much later, in 1974, and its headquarters are in Switzerland, Baar. Unlike,

most of others, Glencore follows a dual strategic approach that differentiates it in the industry. It

has an outstanding position among the world’s largest and most globally diversified natural

resource companies and also as a titan in the commodities trading sector. This dual role is what

keeps Glencore ahead of the competition as it sources materials from around 35 countries all

over the world. This company is involved in production, sourcing, processing, refining,

transporting, storing, financing, and supply of the whole spectrum of products ranging from

metals, minerals, energy products, to agricultural goods. Glencore implements all processes in an

integrated manner that allows them to quickly respond to market changes and seize trading

opportunities, which is one of the biggest advantages in the highly volatile commodities market.

In the past few years, the global economic situation has been characterized by a number of

disruptions with a lot of effect in the commodity sector. However, trade wars have not only

aggravated but also been one of the major contributors to the emergence of geopolitical tensions

such as those between the US and China that have resulted in a significant increase in tariffs thus

impacting the flow of global trade. These trade wars have contributed into metal and mining

sector´s great variation in prices, which is what has affected the revenue streams and market

plans of Anglo American and Glencore.

On the contrary, the influence of COVID-19 shook the economic pillar as well. The pandemic

resulted in a general stagnation of the world's economic activity, with steep decreases in oil and

industrial commodities demand as countries imposed lockdowns and halted industrial business. It
was also a sudden fall in demand, which led to one of the sharpest declines in commodity’s

prices on the market. As a result, mining companies reconsidered their operational capacities and

financial plans, owing to the decline in demand. The two of them had to implement strict

budgetary monitoring mechanisms besides working to enhance the operational efficiencies in

order to keep operating despite the economic downturn. Both companies made this transition

through and, therefore, they have to be flexible, adapting their investment policies to make them

more suitable for the new energy system.

Financial Performance Overview

1.Revenue Trends and Market Dynamics

Among the two years between 2021 and 2023, Anglo American and Glencore PLC went through

a difficult period of time which depended on the volatility of commodity prices and the global

demand. However, these factors had a major impact on their revenue paths, showing the crucial

transformability and resilience required for global mining and commodities.

Anglo American, which is a major mining company, made a considerable drop in revenue in the

range of $41,554 million to $30,652 million from 2021 to 2023. This fall was mostly due to the

lowering global demand for the key commodities like iron ore and copper, which are the

mainstay in core area of its business. Moreover, the decline in China and the rest of Asia's

significant economies was another factor that affected the prices negatively and demand went

down as well.

However, in contrast to Glencore, its revenue went up from $203,751 million in 2021 to

$255,984 million in 2022, because of the successful performance of its trading and mining

divisions. On the other hand, 2023 marked a turnaround of the cycle as the revenues dropped to
$217,829 million. The main factors of this drop were the softening of the global economic

conditions that impacted not only trading volumes but also commodity prices. In spite of that, the

diversified business of Glencore, which is spread across different commodities and geographical

areas, did not take a hard blow from the market swings due to such diversification.

2.Cost Management and Operational Efficiency

Effective cost management is vital for both companies in order to keep profit margins regardless

of revenue fluctuations. Anglo American was aiming at improving operation effectiveness and

reduce costs through any possible means. In spite of all these, the higher cost pressures,

especially in energy price and regulatory compliance, shrank margins.

Glencore via its dual presence in trading and mining was more flexible in its price

management. The trading arm of the company has the ability to alleviate some volatile prices

movement through coordinated buying and selling, which is a manifestation of its diversified

business strategy. One other thing that contributed a lot to Glencore's success in the market was it

emphasize on low cost logistics and supply chain management during the crisis in the industry.

3.Gross Profit Analysis

The two businesses had gross profit fluctuation during the period being dependent on their cost

structures and revenue realizations. The gross profit of Anglo American went hand in hand with

its revenues decline, where the drop in the commodity prices diminished the margins. In 2021,

the firm experienced solid earnings thanks to high commodity prices, but when these prices

normalized, so did profits. Gross profits for Glencore were more stable because of the trading

sector, which had more leverage over market conditions relative to the non-trading Anglo
American division.

4.Strategic Financial Adjustments

To deal with these challenges in the financial and commodity market the Anglo American and

Glencore decided on a strategic plan which was designed to provide more stability of their

financial positions and the adaptation of the Enterprises to economic realities. Over time, Anglo

American has indeed focused more on sustainability and efficiency investing on technologies

that would reduce the environmental impact, and overall enhance operational efficiency.

Glencore implements moves to enhance its trading plans and refine the portfolio through targeted

investments and divestments. The business's agility in confronting market conditions—on the

tactical level (restructuring operations) and the strategic level (managing financial flows)—is one

of the main reasons that this business is not being thrown out by fluctuations in economic

performance. From 2021 to 2023, Anglo American and Glencore – two of the top mining

companies, were within the same spectrum as the rest of the world commodities. Though both

companies confronted the rough times that the economy was going through and market

dynamics, we notice that their strategic responses have stressed strategic planning, fast decisions,

and efficient operations.

5. Profitability Analysis

Operating Incomes: In a period of 2021 - 2023 the operating incomes of Glencore and Anglo

American’s have shown different levels of instability and stability. In 2022, Glencore operating

income witnessed tremendous fluctuations, reaching a peak of $23,798 million, which was

primarily influenced by market forces such as favorable trading terms and commodity prices. Its

value also declined to a lesser extent but not as dramatically as in 2023, showing the fluctuations

resulting from the dependency of commodity trading on the general economy and its evolution.
In comparison, Anglo American had a more stable and stable operating income reflected by the

overall decline in its performance over the past three years.

Net Income Trends: The financial impact from the extraneous operating activities and out of the

ordinary things was also visible in the net earnings of both companies. Interestingly, the results

from 2022 indicated that Glencore's net profit was largely attributed to the gains from assets sale

and favorable trading. Though 2023 saw a relatively lower figure from the market downturns, the

main factor for it was the operational incomes and asset values being affected as well. Besides,

Anglo American also faced additional charges due to asset impairments and restructuring costs,

particularly originating from the regions where the economy declined.

Profitability Ratios: ROA and ROE of both the firms have captured the fact that the firms have

followed different strategies and are operating in different markets. The GORO as a rule has

displayed better indicators ROA and ROE during peaks in the commodity cycle, which indicates

high efficiency in the use of assets during favorable conditions. Regardless, they went down

during economic erosion. On the contrary, Anglo American has been able to keep the ROA and

ROE figures closer to the mark, which shows its financial resilience during more difficult time

and excellence in dividend management.

6. Efficiency Analysis

Asset Turnover Ratios: The asset turnover ratios, the measure of how well a company is using its

assets to make sales, show mixed pictures. Glencore, through its vast trading activities, normally

use higher asset turnover ratios than Anglo American and so show us that the higher the sales it

generates in comparison to its assets. Anglo American whose business operations were revolving

around mining with heavy fixed assets generally disclosed lower ratios, the typical indicator of
large capital invested in mining activities.

Operational Efficiency: Operational efficiencies are measured by operating expense ratios, which

show that Glencore flexibly adjust its expenses in comply with changes of trading environment

and commodity prices. This is the feature that is enhanced in its varying expense ratios which

decrease in the times of high profitability. On the other hand, Anglo American’s operating

expense ratios are slightly higher but more stable, connected to the continuous expenses involved

in running a large-scale mine that are less prone to extreme changes.

7. Liquidity and Solvency Analysis

Liquidity Ratios: Analysis of current ratio and quick ratio, sheds a light on each business's

capacity to handle current liabilities. Glencore has liquidity that is comparatively low because the

nature of its trading business encourages it to hold on to fewer assets that can be converted to

cash easily. Anglo American is the one with greater tangible assets, indicating higher ratios of

liquidity with a more cautious approach to liquidity management as the long-term mining

activities are essential for the organization.

Solvency Ratios: The debt-to-equity ratios for both firms show the degree of their financial

leverage as well as risk profiles. Glencore's much higher debt-to-equity ratio indicates that it is

using debt more aggressively which is in its interest as it is practically a trading company. On the

other hand, Anglo American has a lower ratio, indicating a more conservative financial structure

as the company is planning to reduce risks and to be more sustainability.

Cash Flow Analysis: An examination of the cash flow statements, especially concerning the
operating cash flows and free cash flows, shows the key financial position and the performance

of each company. Glencore’s cash flow is more volatile than competitors due to their reliance on

volatile market conditions, although they are up during profitable years. Anglo American's

operating cash flows are generally drier, which indicates the constancy of its mining activities.

8. Conclusion

Summary of Main Findings:

The comparative financial and operational strategies of Anglo American and Glencore during the

time period of 2021 to 2023 in some way shows that each company is in a good financial state

and has a good set of operational strategy. Anglo American continued to deliver a resilient

operation with more or less robust performance metrics, but its business faced difficulties

including revenue decline and lack of market stability.

On the contrary we see that Glencore managed to earn much more revenue and also showed

flexibility which is usually typical for its diversified business model that includes significant

trading activities. Whereas, on the other hand, it has also increased financial volatility, the cases

of which could have been exampled in the rapid change of its income statements. Both

companies are being quite successful in trading as a part of their strategies to work their way

through the complexities of the market in which they operate, and Glencore possibly being

favored because of its trading capabilities which help to reduce some of impacts of commodity

price fluctuations. Therefore, in line with the global trend of environmental sustainability and

operational efficiency, Anglo American's focus on sustainability and operational efficiency could

contribute to the company's longevity in the mining sector in the long-term.

Part 2: Critical Evaluation of Costing Systems in Production Planning

1. Introduction

The costing system is considered a vital part of the financial system for industries that produce

and manufacture goods, as it is responsible for many key business functions such as pricing, cost

management, and financial planning. Such systems help businesses to determine the costs of

production, set prices, construct budgets and plan activities for the future in a targeted

manner. Costing methodologies are generally categorized into two primary types: both ancient

and new systems, each one created for different business conditions, and for various purposes.
During all the years old traditional costing approach of absorption costing has served as the

backbone for financial accounting. Absorption costing, which is also known as full costing, takes

all the costs of the manufacturing processes, including fixed and variable overheads and load

them onto individual units of production. It relies on the established accounting principles

(GAAP) and is better when employed in situations where production operations are largely

similar and less complicated. The key advantage of the traditional costing methods is their ease

of use and the flexibility in reporting standards. On the upside, the ease of use may compromise

the data quality that is not as accurate as needed for decision making, especially in big and

complex businesses setups. Volume-based overhead cost allocation system applied by the system

can lead to the formation of erroneous product cost information where the fewer overhead

products are assigned with the same cost as those that consume more. Modern methods such as

Activity-Based Costing (ABC) are a very substantial step forward for the field of costing

analysis. Being introduced in the late 20th century, ABC offers a method with a more refined and

accurate approach of dealing with overhead costs. Unlike traditional systems that just use volume

indicators like labor hours and machine hours in the cost allocation, the ABC system use multiple

cost drivers—both volume and non-volume based—to allocate costs according to actual

activities. It enables to represent the production processes in more details and the complexities of

it as it is in operations. ABC enables companies in determining what activities consume and

deliver no value. These insights help them to make more knowledgeable strategic decisions such

as the product design, pricing and profitability analysis.

The selection is between traditional and modern costing method many a times, and this choice

often hinges on several factors such as the size of the business, the level of sophistication in its

operations, and the degree of exactness in information needed for strategic decision-making.
Larger and complex companies with multiple products or a high operational overhead generally

have the greatest use of ABC due to its clear transparent insights. Conversely, smaller firms with

simple operations might find that the old fashioned costing techniques could be enough on the

rationale of their implementation and maintenance being cheaper. Comprehension of the

capabilities and implications of such costing systems is critical for the businesses to help them

handle fiercely competitive and drastically changing production landscape better. The suitable

use of these systems for this purpose results to better financial performance, better strategic plan

implementation, and higher competitiveness. With the diversification of industrial scenarios,

organizations increasingly face the need to efficiently manage the changes in their needs and

technological development by enforcing more advanced costing systems like ABC in order to

keep their dynamic and strategic business operations

2. Discussion

A. Traditional vs. Modern Costing Systems

Absorption Costing:

Absorption costing is a traditional costing method in which all production costs, both fixed and

variable, are absorbed by the finished units. This method stands out for its simplicity and

conformity with generally accepted accounting principles (GAAP), which implies that

production costs must be included in inventory valuation in full. On the other hand, although

ideal for less complex manufacturing techniques or when product lines are not widely varied,

absorption costing can give erroneous product cost information if different products utilize

overhead costs at varying ratios. Due to this misalignment, businesses might make decisions that

contain inaccuracies regarding poor performance, as well as high costs.

Activity-Based Costing is the precise method that aims to overcome the shortcomings of

absorption costing by assigning the costs to the products according to the activities involved in

the production. This approach entails determination of activities in the organization and

classification of costs attached to products according to the level of use of these activities. ABC

is mainly employed to identify these drivers in cases of matrix structures or production of

multiple products with a significant portion of indirect costs. This system is essential for

organizations that are aimed at optimizing their decision making related to new product

development, pricing strategies, and even customer profitability analysis with the objective of

improving the strategic management of the business firm.

B. The Effects of Organization Size and Type on the Choice of Costing System

The factors that decide what costing system is properly implemented involve the few aspects of

the organization such as the size of the company, the complexity of it's manufacturing

procedures, and the variety of products. This option has an impact not only on financial reporting

but also transcends deeply into strategic decision making related to pricing, development of new

products, process improvements and even on market positioning.

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In the case of SMEs, the most critical questions are related to affordability, ease of application,

and availability of administrative assets to run it. Absorption costing is feasible in this appraoch
as it follows a simple method of apportioning costs. There is no need for elaborate tracking and

analysis systems like those applied in ABC where advanced methods are used. It lays down the

foundation of precise procedures that aim to understand the production costs of small and

medium businesses with less product range and simple processes, which usually tend to be fair

enough to answer most of the financial reporting and basic cost management requirements.

Furthermore, the ease of absorption costing assists businesses in their respective reporting

system against possible regulatory requirements without spending extra for asset management.

Large, Complex Organizations:

Conversely, big firms, particularly those with different products units or complicated processes

with several stages discover helpful because of details and activities specific insights provided

for by ABC. Companies with their huge organizational scale, usually would have overhead costs,

which cannot be perfectly allocated applying traditional costing methods. Although it can be

used by large companies to automatically track the exact pattern of cost incurrence across the

different departments and items, it certainly is essential to identify the sources of savings,

improve resource allocation, and enhance the overall organizational performance. In addition to

the power that ABC has to light the financial result of each specific activity, it contributes to the

strategic objectives of the business such as cost reduction, product line optimization, and even

customer profitability analysis.

Strategic Implications:

The strategic implications of selecting the correct costing system also spread out beyond

calculation of just the cost. Along with the development of organizations as they diversify,

expand and enter into new market or product segments, there are limitations of the traditional
costing systems whereby their applicability becomes questionable. For example, absorption

pricing will ignore such growth related complexities and hence may lead to products that are

costed wrongly. These can lead to even wrong financial accounts. The implementation of the

ABC system is often considered as a critical step towards the ability of management to make

more informed and precise decisions, which is very close to modernities of business

environments with dynamic conditions.

Additionally, ABC systems contribute to the implementation of continuous improvement

techniques like Lean and Six Sigma in a proper way by giving a detailed account of cost drivers

and how these affect the efficiencies of the operations. The inclusion of these strategies such as

business optimization into the enterprise optimization strategy can boost an organization's ability

to effectively compete in a highly volatile economic environment where the cost leadership and

product differentiation are critical.

Conclusion:
In the end, an organization should use a costing method of which the chosen should be in line

with its size, operational complexity and strategic objectives. Small firms tend to rely on the

absorptions costing approach that aims for simplicity and cost control, while the large more

complicated organizations may find a complete and flexible accounting system like ABC crucial

for maintaining competitive advantage and supporting strategic growth. This strategic alignment

ensures that the approach applied to financial management is not only right for current needs but

also flexible enough to absorb future challenges and opportunities, which ultimately support

organizational sustainability.
Appendices

Appendix A: Detailed Financial Ratios and Calculations

The following are some of the key financial ratios calculated for Anglo American and Glencore

PLC for the years 2021 to 2023:

Anglo American PLC

Financial Ratios 2021 2022 2023

Return on Assets (ROA) 13.0% 6.8% 0.4%

Return on Equity (ROE) 30.8% 13.3% 0.9%

Debt-to-Equity Ratio 1.12 0.98 1.10

Current Ratio 1.75 1.87 1.87

Asset Turnover 0.63 0.52 0.46

Operating Margin 41.6% 31.0% 21.3%

Glencore PLC

Financial Ratios 2021 2022 2023

Return on Assets (ROA) 4.8% 7.0% 4.0%

Return on Equity (ROE) 40.0% 63.7% 39.4%

Debt-to-Equity Ratio 15.47 8.40 19.17

Current Ratio 1.21 1.14 1.06

Asset Turnover 0.95 1.05 0.98

Operating Margin 4.8% 9.3% 4.0%

These ratios provide insights into each company's efficiency, profitability, liquidity, and financial

structure, helping to understand their operational and financial strategies in greater depth
Appendix B: Anglo American PLC and Glencore PLC Financial Statements

Below are the tables summarizing the financial statements for Anglo American PLC and

Glencore PLC for the years 2021, 2022, and 2023, presented in million USD:

Anglo American PLC

Balance Sheet Summary

Year Total Assets Total Liabilities Total Equity

2021 $65,985 $31,215 $27,825

2022 $67,407 $33,454 $33,953

2023 $66,544 $34,927 $31,617

Cash Flow Statement Summary

Year Net Cash from Operating Activities Net Cash from Investing Activities Free Cash Flow

2021 $8,860 -$541 $6,346

2022 $13,659 -$1,719 $6,757

2023 $11,036 -$3,555 $5,608

Glencore PLC

Income Statement Summary

Year Total Revenue Operating Income Net Income

2022 $255,984 $23,798 $17,345

2023 $217,829 $8,699 $4,280

Balance Sheet Summary

Year Total Assets Total Liabilities Total Equity

2021 $203,751 $191,370 $12,381

2022 $255,984 $228,723 $27,261

2023 $217,829 $207,046 $10,783

Cash Flow Statement Summary

Year Net Cash from Operating Activities Net Cash from Investing Activities Free Cash Flow

2021 $8,860 -$541 $6,346

2022 $13,659 -$1,719 $6,757

2023 $11,036 -$3,555 $5,608

These tables provide a clear and concise overview of the financial positions and cash flow

performances of Anglo American PLC and Glencore PLC over the specified period. This data is

critical for a detailed analysis of the companies' financial health and strategic management

during these years.