Rio Tinto Financial Analysis
Contents 1. Executive Summary……………………………………………………..3 2. Financial Ratio Analysis a. Short Term Solvency Ratio…………………………………….4-5 i. Current Ratio………………………………………….…4 ii. Quick Ratio……………………………………………...5 b. Long Term Solvency Ratio……………………………………..5-6 i. Debt To Equity………………………………………….5 ii. Times Interest Earned……………………………...……6 c. Asset Utilization Ratio……………………………………….….7-8 i. Average Collection Period…………………………….…7 ii. Inventory Turnover…………………………………….…8 iii. Asset Turnover……………………………………………8 d. Profitability Ratio…………………………………………..…….8-10 i. Return On Assets……………………………………..…..8 ii. Operating Profit Margin……………………………..……9 iii. Net Profit Margin………………………………….………9 3. Hr Cost Drivers Analysis…………………………………………………… 4. Recommendations………………………………………………………….. 5. Conclusion………………………………………………………………….
Executive summary
The paper shows Rio Tinto Limited financial ratio analysis. For the sake of convenience, the analysis is divided into four segments namely short term solvency, long term solvency, asset utilization and profitability. The analysis for the FY 2008 and 2007 has shown that the company has managed to have a satisfactory level of liquidity, less risky reliance on debt financing which is a wise move for the company to adopt particularly during economic recession. On the apart of asset management and utilization, Rio Tinto Limited is at a satisfactory level by managing its inventory, receivables and assets with its prudent and conservation policies and increase in sales has helped the company to enjoy a stable turnover. However, the company’s profitability is tormented to a large extent mainly due to 124$ rise in R&D, 66% increase in selling and administrative expenses in turn resulting in 108% rise in operating expenses. All this has shown its adverse effects on net
Executive summary
The paper shows Rio Tinto Limited financial ratio analysis. For the sake of convenience, the analysis is divided into four segments namely short term solvency, long term solvency, asset utilization and profitability. The analysis for the FY 2008 and 2007 has shown that the company has managed to have a satisfactory level of liquidity, less risky reliance on debt financing which is a wise move for the company to adopt particularly during economic recession. On the apart of asset management and utilization, Rio Tinto Limited is at a satisfactory level by managing its inventory, receivables and assets with its prudent and conservation policies and increase in sales has helped the company to enjoy a stable turnover. However, the company’s profitability is tormented to a large extent mainly due to 124$ rise in R&D, 66% increase in selling and administrative expenses in turn resulting in 108% rise in operating expenses. All this has shown its adverse effects on net
Bibliography: Iqbal Mathur, 2000, Introduction to Financial Management, International edn, Macmillan Publishing Co.Inc, New York. Ramesh K. S. Rao, 2000, Fundamentals of Financial Management, Macmillan Publishing Co.Inc, New York. Rio Tinto Ltd, Financial Statements, viewed 1 November 2009, retrieved from http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&symbol=RIO.AX, http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=INT&symbol=RIO.AX