The main aim of this report is to understand the concept of financial management

RIO TINTO

FINANCE 1
Executive Summary
The main aim of this report is to understand the concept of financial management. In this report,
Rio Tinto has been taken into consideration to evaluate the financial position of the organization.
The ratio of the organization has been evaluated to evaluate its current financial position in the
market. After the evaluation of ratio, it is observed that the current position of Rio Tinto states
the growing percentage. In this paper, the financial analysis of the company has been done as per
the investor’s perspective. Being an investor, I really would like to invest in the organization as
the liability of the company is decreasing and it also believes in investing in current assets
instead of fixed assets.

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1 Introduction
Financial management is the procedure of planning, monitoring, organizing and controlling the
financial resources of the business. Financial Management focuses on ratios, equities and debts
of the organization (Karadag, 2015). It is the application of general principles of management
that helps to assess the financial situation of the business. In the process of financial
management, the organization has to assess the financial position of the company. It is requited
to evaluate the financial ratios by examining the financial data of the organization. The financial
ratio’s of the company is classified in different categories such as efficiency, liquidity,
profitability, gearing and the others. The main purpose of the business is to understand the
concept of financial analysis of the company. For the financial analysis, Rio Tinto has been taken
into consideration to evaluate the financial position of the company by examining its financial
data.
In the beginning of this report, the ratio’s will be evaluated and those are profitability, efficiency,
liquidity and gearing ratio. After evaluating the ratios, the analysis will be done on the company
by considering the many points. At the end of the report, the recommendation will be given to
recover the financial performance of the business on the basis of financial analysis.
Background and Business
Rio Tinto is an Australian multinational company which operates in metal and mining
corporations. It was established in the year 1873. It is dual-listed company which is traded on
both the London Stock Exchange. It registered under the Australian Securities Exchange (ASX).
The company has significant operations in refining, bauxite and iron ore in six continents but it

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mainly focuses in Australia and Canada. The financial psoition of the company is evaluated by
evaluating the financial ratio’s. The some of the ratio have been evaluated in this report such as
Efficiency ratios, Liquidity ratios, Profitability ratios, and Gearing ratios .
2 Company Analysis
Rio Tinto is the largest mining company that operates the business in high turnover. The
financial position of the company will be analyzed by evaluating the financial statements of the
organization. The analyses of financial statements are given below:
Income Statement
As per the analysis of Income statement, it has been seen that the company earned the profit after
tax US$13925 m in the year 2018 which is high as compare to previous year 2017. In the year
2017, the organization earned the profit after tax of the amount US$8851m. As the profit
increase, the amount of tax is also increasing which reflects that the company is in the growing
position. It has been found that the operating profit is also increasing in the year 2018

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US$17687m which was US$14135 in 2017. There are various reasons behind the increasing
revenue of the company. The main reason of increasing profit is its operating expenses. The
operating expenses of the business are decreasing. The amount of impairment charges is
reducing with the large amount such as $594m. In the year 2017, the charges is 726 but in the
year it is decreasing such as US$132m. The amount of operating cost is also increasing which
indicates that the organization investing the large amount to improve the quality of services. Due
to increasing the operation cost, the operating profit is also increasing as the efficiency or quality
providing the goods to consumer is improved.
Balance Sheet

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By analyzing the balance sheet, it is observed that the total assets of the firm are decreasing from
the previous year. In the year 2017, the total asset of the company is 95726 which is decreasing
with the amount 90490. It has been seen that the company invest its current assets instead of
fixed assets due to which the amount of current assets is increasing and fixed assets is decreasing
from the previous years. It specifies the strong liquidity position of the firm as compare to last
year. As per the analysis of liabilities, it has been seen that the short or long term liabilities of
Rio Tinto is decreasing in the year 2018 from the last year 2017. Reducing the liability affects
the financial position of Rio Tinto as it makes the strong financial performance.
The current financial performance of Rio Tinto is effective or neither is it increasing with the
continuous rate. It has been seen that the value of total assets is decreasing which states the
decreasing revenue of the company. But it has been evaluated that the organization invests in