Rio Tinto Financial Analysis Essay example

3084 Words Sep 10th, 2014 13 Pages
Executive summary
The report consists of three major parts, which are firstly divided into providing background information of Rio Tinto and its biggest competitors BHP and Vale in the mining industry. A SWOT-analysis takes into consideration the external factors of the market as well as the internal factors which may have an impact on the financial statements of Rio Tinto.
Secondly, the main purpose of this paper is to compare Rio Tinto’s financial ratios to its biggest competitor BHP. Investors may consider them as good predictors of failures or advantages in the business and may predict if a company can survive in the future. The results illustrated in this paper, show that there are some differences between the two companies in
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Operating expenses are impacted by the local currencies of those nations where the company’s mines and plants are placed. Additionally by those currencies in which the expenses of foreign gear and administration are established (Rio Tinto 2013). Therefore the company has to provide its financial statements and positions in a uniform currency, in this case in United States dollars. However this contains many risks in the foreign exchange rate, accrued from varancies of foreign currencies in connection to the US dollar. A reduction of the US dollar will influence the recorded results of the organisation and may likewise influence the estimation of the company’s assets and liabilities.

2. Limitations and regulations for investments
Limitations and laws of Australia and the United Kingdom force limitations and commitments on people who are engaged in overseeing the interests in overabundance of defined limits that, in specific situations, contains commitments to make an offer for the greater part undetermined issued shares of RT. Under UK regulations and laws the value limit of RT plc is 30 per cent, whereas RT ltd. shows a percentage of 20% under the Australian regulations (Rio Tinto 2013). Also the approval of the treasury department is needed.

3. Financial Ratio analysis
6.1 Profitability Ratio

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