Financial Management: Case Study Report on Rio Tinto Group

FINANCIAL
MANAGEMENT : - CASE
STUDY REPORT

EXECUTIVE SUMMARY
The current project shall be highlighting on the financial and the non-financial analysis of
the Rio Tinto Group. There is the key financial and the economic outlook of the company that
shall be disclosing the recent events that have been incurred in the business. Apart from that the
major part is covered in the financial ratio analysis that shall be undertaken to compare the
financial statements of the business for the two consecutive years showing the performance that
it has generated and the improvements that are made over the years.

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................3
INTRODUCTION...........................................................................................................................1
Background and business............................................................................................................1
COMPANY ANALYSIS.................................................................................................................1
Financial highlights.....................................................................................................................1
Economic outlook........................................................................................................................1
RATIO ANALYSIS........................................................................................................................2
Profitability and market ratios.....................................................................................................2
Efficiency ratios...........................................................................................................................3
Liquidity ratios.............................................................................................................................4
Gearing ratios...............................................................................................................................5
RECOMMENDATIONS.................................................................................................................6
Is the current reporting year better than the prior reporting year for the Rio Tinto....................6
Scope of the company succeeding in the future..........................................................................6
Likelihood for the merger or the acquisition for the Rio Tinto Group........................................7
Suggestions for the company to succeed in the future................................................................7
Impacts from the external business environment........................................................................7
Should the investment be made in Rio Tinto...............................................................................8
REFERENCES................................................................................................................................9
APPENDICES...............................................................................................................................10
Calculation of ratios...................................................................................................................10

INTRODUCTION
Background and business
The Rio Tinto Group is the Anglo-Australian multinational company which is a leading
mining group that was established in 1873 and is headquartered in London. It is one of the
leading businesses and the second largest in the metals and mining corporation. It is indulged in
the activities like finding, mining and processing of the Earth's mineral resources. Some major
minerals that it produces are iron ore, copper, diamonds, gold and uranium etc. It has been
having the poor records in terms of the corporate governance and the corporate social
responsibility that is affecting the human and the labour rights and apart from that it is involved
in several corporate scandals like the Juukan Gorge.
COMPANY ANALYSIS
Financial highlights
The current financial performance of the Rio Tinto Group shows the high potential of the
company in the operations sector as the profitability margin has risen to a huge extent depicting
the positive signal for the business. Apart from that the strengthening of the balance sheet can
evidently be noticed in case of the decrease in the debt element of the company that is from 3.7
billion to 0.7 billion leaving huge amount of the free cash flows for the company under the
consideration. The year has provided with the extraordinary performance in the year 2020 also
boosting the safety and the security position of the company through the proper application of
the corporate governance (Yap, Komalasari and Hadiansah, 2018). With the increased
performance of the company the efficiency of the stakeholders is also increased through
providing the better returns on equity and the capital employed of the company. The company
has also significantly increased the margin of the dividend payout ratio in the company further
increasing the satisfaction that is attained by the shareholders that are affiliated by the business
from 5.9 to 7.4.
Economic outlook
The economic outlook of the company depicts that there is a strong performance
underlying the current annual reports of the Rio Tinto Group. It can also be assessed that such
performance of the company strengthens its position in the market. One of the significant
contributors to the same are the commodity prices of the iron ore in the market which tends to
rise and comprises the major portion of the earnings in the market (Fitch Affirms Rio Tinto at 'A';
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FINANCIAL
MANAGEMENT : - CASE
STUDY REPORT

EXECUTIVE SUMMARY
The current project shall be highlighting on the financial and the non-financial analysis of
the Rio Tinto Group. There is the key financial and the economic outlook of the company that
shall be disclosing the recent events that have been incurred in the business. Apart from that the
major part is covered in the financial ratio analysis that shall be undertaken to compare the
financial statements of the business for the two consecutive years showing the performance that
it has generated and the improvements that are made over the years.

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................3
INTRODUCTION...........................................................................................................................1
Background and business............................................................................................................1
COMPANY ANALYSIS.................................................................................................................1
Current Financial Performance....................................................................................................1
Financial highlights.....................................................................................................................1
Economic outlook........................................................................................................................2
RATIO ANALYSIS........................................................................................................................2
Profitability and market ratios.....................................................................................................2
Efficiency ratios...........................................................................................................................3
Liquidity ratios.............................................................................................................................4
Gearing ratios...............................................................................................................................5
RECOMMENDATIONS.................................................................................................................6
Is the current reporting year better than the prior reporting year for the Rio Tinto....................6
Scope of the company succeeding in the future..........................................................................7
Likelihood for the merger or the acquisition for the Rio Tinto Group........................................7
Suggestions for the company to succeed in the future................................................................7
Impacts from the external business environment........................................................................8
Should the investment be made in Rio Tinto...............................................................................8
REFERENCES................................................................................................................................9
APPENDICES...............................................................................................................................10
Calculation of ratios...................................................................................................................10

INTRODUCTION
Background and business
The Rio Tinto Group is the Anglo-Australian multinational company which is a leading
mining group that was established in 1873 and is headquartered in London. It is one of the
leading businesses and the second largest in the metals and mining corporation. It is indulged in
the activities like finding, mining and processing of the Earth's mineral resources. Some major
minerals that it produces are iron ore, copper, diamonds, gold and uranium etc. It has been
having the poor records in terms of the corporate governance and the corporate social
responsibility that is affecting the human and the labour rights and apart from that it is involved
in several corporate scandals like the Juukan Gorge.
COMPANY ANALYSIS
Current Financial Performance
The current financial performance of Rio Tinto Group represented by its financial
statement states that the year 2020 has provided extraordinary response for the company
overshadowing past Jukaan George incident. This can be highlighted through the increased
earnings before interest and tax of 23.9 billion, expanded return on capital employed up to 27%
and also extending benefits to shareholders of up to 557 US cents per share. It is also reflecting
strong safety performance, fatality free for second year in a row. It has also established strong
balance sheet with the reduction in net debt to 0.7 billion. Also, the capital growth projects have
been undertaken from the available free flow of funds.
Financial highlights
The current financial performance of the Rio Tinto Group shows the high potential of the
company in the operations sector as the profitability margin has risen to a huge extent depicting
the positive signal for the business. Apart from that the strengthening of the balance sheet can
evidently be noticed in case of the decrease in the debt element of the company that is from 3.7
billion to 0.7 billion leaving huge amount of the free cash flows for the company under the
consideration. The year has provided with the extraordinary performance in the year 2020 also
boosting the safety and the security position of the company through the proper application of
the corporate governance (Yap, Komalasari and Hadiansah, 2018). With the increased
performance of the company the efficiency of the stakeholders is also increased through
providing the better returns on equity and the capital employed of the company. The company
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