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Fortescue Metals Group Limited's Case Study

   

Added on  2021-06-15

16 Pages1088 Words99 Views
BACKGROUND ANALYTICAL REPORTFortescue Metals Group Limited

An Overview The fourth largest iron ore producer and an Australian based company, Forstecue Metals Group Limited founded in 2003, has holdings of roundabout 87000km^2 in the Western region of Australia often known as Pilbara.The holding of the company is larger than its competitors BHP Billiton and Rio Tinto.The group has two main areas of operation which are the Chichester Hub and Solomon Hub (Billett, Hribar and Liu, 2015).The net revenue of the company as of now is US$8.547 billion.

Determination of CostsFortescue’s combination of costs involve weightage of Equity at 36% and weightage of debt component at 64%.To find out the optimal capital structure of the company the calculation of WACC is done under which the costs are proportionately weighted.Fortescue Metals Group has reduced its total debt levels from US$6.77B to US$4.47B, which is a combination of both the short term as well as long term.

Capital StructureDebt to Equity RatioDebtEquity832711301110843711301Debt to Equity Ratio 0.75The debt to equity ratio of the Fortescue Metals Group Limited is 0.42 as compared to the previous year 0.75 in the financial year 2017.The firm has a lower debt as compared to the equity. This means that the company is interested in financing the assets through the equity component more.Debt to Equity RatioDebtEquity464611301103474911301Debt to Equity Ratio 0.42

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