HI5020 Corporate Accounting - Assignment
Added on 2021-05-31
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Finance
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Rio TintoThe chosen company for the analysis is Rio Tinto. Rio Tinto is a public limited company. The chosen company has its operations across continents and is an enormous multinational mining and minerals and metals company. It is listed on the Australian Stock Exchange as well. It has profits of around 8851 USD as on 31st December 2017. The financial statements of Rio Tinto are analyzed below:Cash Flow Statementsi) It is seen that the Net Income or NI is evaluated in the company’s Income statement. It is also noticed that the evaluated net income comprises of many notional expenses and income that are an item reflected in the company’s balance sheet. It is required for the company to either add back or deduct its noncash items depending on what the case is. After adjusting theNI, it is required for the management to identify and account for changes in asset accounts which can affect the financial position of the organization (Rio Tinto, 2017). The company adds back its non-cash items in the name of dividend from equity accounted unit to the Net Income so as to ascertain operational cash flows. Once it is done, the transactions impacting the cash position of operating assets are adjusted. Then, operating income is reduced by subtracting interest from it. The subsidiary portion of the company is ignored and excluded from the capital of the company while non-controlling assets form the equity portion of the capital of the company. Dividends that are paid to holders who have a non-controlling interest in subsidiaries should be deducted as it forms a part of operating income or expenses (Petty et. al, 2012). Further, it is seen that the tax paid for the year is also accounted for.It is worth a thought that the rates of interest have fallen down in 2017 yet there is an increment in taxes. The sales have enormously risen and as a result of which there has been a considerate increment in the interest amount.The operating activities yielded net cash worth $13884 million. The investing activities of thecompany that adjusted all the gains and losses from the cash flows were further adjusted fromcash flow from such activities. The company makes a lot of investments by purchasing of plants and equipment, properties and intangible assets. For the year 2017, the company invested around $4482 million into purchasing of such assets. It was also seen in the same year that the company enormously sold its investments in joint ventures, subsidiaries, and associates. The company invested in financial assets that acted as the liquid fund for the company worth $723 million (Rio Tinto, 2017). The annual sales were around $2675 million.2
Rio TintoThe company’s decisions are quite foolish as there have been enormous purchases and investments while the sales are fewer and weaker as there were only $40 million annual sales.$138 million was assembled from the sales proceeds of property, plants, and equipment and intangible assets (Rio Tinto, 2017).The company has made relatively fewer investments in the mutual funds. Approximately around $18 million is the reported figure accounted for the miscellaneous investments. The company did not make investments in acquiring joint ventures, associates or shares of subsidiaries. Around $2373 million of the net cash utilized in investing activities (Rio Tinto, 2017).A company manages to arrange its funds through its financing activities so as to run its day today operations. These activities are the source through which a fund is drawn primarily.The dividend paid to shareholders is around $4250 million. This shows that the shareholders are informed about the high sales and high profits. The figures clearly reflect that the company almost had zero borrowings in the current year. This year the borrowing was of $18million which is almost a negligible amount as compared to the borrowing in the last year that was for around $4413 million (Rio Tinto, 2017).ii) In order to form an understanding of how Rio Tinto is performing and where are its funds being utilized, it is required to compare the activities of the past 3 years. Non-cash and non-operating expenses, incomes, net income from the profit and loss statement, cash flows from operating income has accounted for cash flows from consolidated operations. The cash flows from operating income for the year 2015 were $12102 million, and $11368 million in 2016 and $16670 million in 2018. The net cash that was generated from operations in 2015 was $9383 million and $8465 million in 2016 while $13884 million in 2018. The expense associated with the interest was reduced this year on account of fewer borrowings this year. Mutual funds yielded more dividend. In comparison to the last 2 years, the profits encountered this year were enormous which resulted in huge net cash flows from operations in the present year.To maximize the funds available and earn operating income companies opt for investing activities that are making investments in properties, assets, etc. Activities like investments and financials have a base of operating income. These 2 activities are in sync with one another.3
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