FIN3CSF - Fortescue Metals Group's Activities and Performance

This case study provides an analysis of Fortescue Metals Group Limited's operational activities and financial performance, based on their annual reports. It examines the company's profit and loss statements, statement of affairs, directors' report, and statement of cash flows, utilizing key financial ratios such as net profit ratio, debt-equity ratio, current ratio, and equity to total assets ratio. The analysis reveals the company's increasing profitability and cash flow, while also highlighting concerns about its working capital management. The report concludes with recommendations for improving working capital policies and maintaining sustainable growth, positioning Fortescue Metals Group as a leading iron ore producer with robust financial strategies. Desklib offers a variety of resources, including solved assignments and past papers, to support students in their academic endeavors.

OPERATIONAL ACTIVITIES AND
PERFORMANCE
FOTESQUE METALS GROUPS
LIMITED
STUDENT NAME –
STUDENT ID -

TABLE OF CONTENTS
EXECUTIVE SUMMARY
NAME OF THE COMPANY AND ITS NATURE
ANALYSIS OF THE ANNUAL REPORT
OPERATIONAL PERFORMANCE
CONCLUSION AND RECOMMENDATION
REFERENCES

EXECUTIVE SUMMARY
Whenever any analysis is required to be done for
any concern, it shall be done through the annual
report of the concern. It describes the financial
position as well as the financial performance of the
company that it has gained over the period of the
time. Secondly the strategies of the company shall
be analysed through the embedded directors
report and sustainability report which will give an
insight as to how the company is working and will
work in accordance with the defined strategies.
Through this report, the major three aims have
been fulfilled.

EXECUTIVE SUMMARY (CONTD.)
First aim is to analyze the results of the selected
company. This has been done through the analysis of
the financial statements of the company as annexed
to the annual report of the company. Second major
aim is to comment upon the working capital
management policies of the company as to whether
it is as per the nature and size of the business of the
company.
With these two major aims this report has been
prepared with adequate conditions and appropriate
headings.

INTRODUCTION
Annual report has very significant role in
judging the performance of the company. It is
because the annual report of the company not
only lays down the financial figures of the
company for the particular year end but also
lays down the strategies that the company
has decided to follow for the furtherance of
the business along with the directors
comment on each of the strategy so made.
Without the analysis of the annual report, the
operational performance can not be judged.

INTRODUCTION (CONTD.)
Through this presentation, the more focus be
on the analysis of the financial statements of
the company using the major four ratios
namely – net profit ratio, debt equity ratio,
current ratio and equity to total assets ratio.
With these four major ratios, the analysis will
be made.
Secondly the company policy on the
management of the working capital needs
shall be discussed with reference to the
current ratio and how the company has

NAME OF THE COMPANY AND
ITS NATURE
The company that has been selected for the purpose of the
report is Fortescue Metals Groups Limited.
The company is based from the Northern Western Region
of Australia(Horngren, 2012).
The company has been regarded as the fourth largest
listed company involved in the business of production and
exploration of iron ore.
The company is operating its operations through two
major locations these are Chichester Hub and Christmas
Greek. Both are located one hundred and twenty
kilometers apart.
The company’s major objective has been to achieve the
production of one hundred and twenty kilometers a part.

ANALYSIS OF THE ANNUAL
REPORT
Annual Report of the company majorly have
four things namely:
Statement of the Profit and Loss
Statement of Affairs
Directors Report and
Statement of Cash Flows (Horngren, 2012 ;
Premnath, 2012)

ANALYSIS OF THE ANNUAL
REPORT (CONTD.)
Statement of Profit and Loss
Profit has been at an increasing rate for the
last three years from 3.70, 13.89 and 24.78 in
the years ending 2015, 2016 and 2017
financial years.
It means that the company is providing better
results to the shareholders.

ANALYSIS OF THE ANNUAL REPORT
(CONTD.)
Statement of Affairs
The working capital situation of the company
is not good as current ratio has been
decreased from 1.48 to 1.18.
It alarms the liquidity position in the future.

ANALYSIS OF THE ANNUAL
REPORT (CONTD.)
Directors Report
The directors in their annual report has
mentioned that the company will have the net
profits in the future and will not distribute
whole amount as dividend rather than plough
back into the profits of the company.
Thus, it has helped in increasing the net
wealth of the shareholders of the company
(Zimmerman, 2012).

ANALYSIS OF THE ANNUAL REPORT
(CONTD.)
Statement of Cash Flows
Net operating cash flows is positive where as
net investing cash flows and the net financing
cash flows for the year ending 2017 is less
and operating cash flows have been able to
set off the negative figures and thus have
provided the net increase in surplus and thus,
it is regarded as the cash rich company
(Kaviyani, 2011).