Corporate Finance For Dummies

Running head: CORPORATE FINANCE
Corporate Finance
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CORPORATE FINANCE1
Table of Contents
Fortescue Metal Group Company Perspective................................................................................2
1. Company Perspective..................................................................................................................2
Cash Conversion Cycle................................................................................................................3
Bond Valuation............................................................................................................................4
Credit Rating of Bond..................................................................................................................5
Share Price...................................................................................................................................5
2. Capital Budgeting........................................................................................................................6
References........................................................................................................................................9

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Fortescue Metal Group Company Perspective
1. Company Perspective
The Fortescue Metal Group Company also referred as the FMG Company is an iron ore
company that is operating in the Australian Region. The analyzed company is ranked as the
fourth largest company when compared in the amount iron ore produced after companies like
BHP Group, RIO Tinto and Vale. The analyzed company is a public limited company that is
listed in the stock exchange with its ticker symbol as FMG. The industry in which the company
operates is the Metals and Mining Industry. The company was founded in the year 2003 and is
headquartered in Perth, Western Australia. The company is having its operations on a worldwide
basis and this has been well possible for the company with the help of the key subsidiaries that
the company has like FMG Resources, NCZ Investments Pty Ltd and others. The key products
list in which the company deals is primarily the Iron Ore, Steel, Gold, Copper and Lithium. The
total number of employee base that are directly connected with the company is around 5,445
employees on a world-wide basis. The Metal Group primarily has two main and key areas of
operations that are located in the Pilbara region of Western Australia which is the Solomon Hub
and the Chicester Hub.
Opportunities for FMG Company
The key set of opportunities that the FMG Company can well apply in the business line
of operations are primarily the expansion of operating capacity that the company has done to
around 155 MTPA can further bring a more expansion in the exports which the company carries

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on. The import level of China on the other hand is increasing continuously for the company
which will be further boosting the company’s level of sales and various other activities.
Threats for FMG Company
Increasing competition in the iron ore and metals group ona increasing basis is affecting
the revenue base and the market share of the company. On the other hand, bad weather
conditions in the Pilbara region is impacting the iron ore production and the business activities of
the company. The threats identified in turn affect the operations and the profitability of the
company on an overall basis.
Cash Conversion Cycle
The cash conversion cycle for the company has been well calculated by taking the days
inventory outstanding for the company plus days sales outstanding minus the days payable
outstanding for the company. The cash conversion for the company was around 6.26 days in the
year 2016 and has been around -5.53 days in the year 2017. The changes in the cash flows of the
company can be well shown below in the table. The key reason behind the changes that have
been observed in particular for the changes in the cash flow of the company has been due to the
higher day’s payable time taken by the company which has well allowed the company to
effectively maintain the cash cycle. However it is important to note that since the company’s
operating cash cycle is negative, it well means that the company is taking a prolonged period of
time for well clearing for their payables or stated amount of current liabilities. The cash
conversion cycle for the company has been low for the company in the year 2016 and has
decreased to a well below the consistent level. If the company is taking too much a period of
time then the payables of the company might which in turn would affect the ability of the