Brief Analysis Report of Rio Tinto

design analysis hide of Rio Tinto Rio Tinto is a British multinational metals and mining potbelly stove with headquarters in London and a management office in Melbourne, Australia. The corporation was founded in 1873 and it ranked at the number 263 in globose 500 of largest worldwide companies in 2008. (Wikipedia, 2012) Rio Tintos authorize earning has decreased in the year 2011 mainly because of the financial crisis and global frugal uncertainty (Annual composing of Rio Tinto, 2011). Meanwhile, the leadership claimed that they believe the long-term outlook is strong. Figure 1 strike Financial Data of Rio Tinto (from 2010 and 2011) YearItem 2010 / US$ one thousand one thousand thousand 2011 / US$ million sack up amplification before evaluate 20,491 13,214 Net salary after tax 15,098 6,765 Total comprehensive income 16,492 4,365 Sales 55,171 60,537 Total assets 112,773 119,545 Current assets 21,459 21,898 Current liabilities 12,876 14,966 interchange flow from run ac tivities 23,530 27,388 (Annual report of Rio Tinto, 2011) According to figure 1 the exculpate profit margin of Rio Tinto in the year 2010 fell from27. 4% to 11. 2% in the year 2011. ( straighten out profit margin is mate to crystallise profit after tax divided by sales revenue) The profit enumerate to net worth of this company in the year is 5. %. (profit rate to net worth is net profit after tax divided by average total assets) The investors should use comprehensive income figure rather than net profit because comprehensive income includes all changes in equity during a period. (comprehensive income is equal to net profit plus other comprehensive income) The operating immediate payment flow increased by $US3,858 million from $US23,530 million in the year 2010 to $US27,388 million in the year 2011 meanwhile, the sales raised by $US5,366 million from $US55,171 millionin the year 2010 to 60,537 million US$ in the year 2011.This matter of situation indicates Rio Tinto expended $U S1,580 million on operating the company. The current assets increased smoothly from $US21,459 million in the year 2010 to $US21,898 million in the year 2011. At the very(pre nary(prenominal)inal) period the current liabilities raised up dramatically from $US12,876 million in the year 2010 to $US14,966 million in the year 2011. This data shows the company did not work well in this period. (Figure 1) Rio Tinto will cutting office jobs in Melbourne and Sydney in Australia and the board of the company will cut support and emolument costs by 10 per cent around the world (Greg, 2012).Because they express they need to build resilience and controlling costs during a unenviable time, which includes product price decreases and Europes debt crisis (Greg, 2012). Gregs report (2012) as well as showed that the Rio Tintos first half net profit chuckped dramatically to $US4. 9 billion ($A4. 69 billion) from $US7. 78 billion ($A7. 44 billion) last year. non only Rio Tintos earnings has droppe d but BHP Billitons earnings be forecast to drop at the same time the worlds biggest iron ore miner Vale also posted lower than anticipate second quarter earnings at two year lows(Greg,2012).In the root word statement of financial position the goodwill of Rio Tinto has dropped almost half of that in the year 2010 which is from $US15,316 million to $US8,187 million(Annual report of Rio Tinto, 2011). This matter of fact indicates that the company Rio Tinto appears to be done not well. The inventories of this company increase by $US551 million from $US4,756 million in the year 2010 to $US5,307 million in the year 2011(Annual report of Rio Tinto, 2011). The inventories leap out up means the product of Rio Tinto cannot be sold mainly because the delivery is uncertain and the demand of the ore is weak.The current and non-current liabilities all raise heavily and the net assets decreases from $US64,512 million in the year 2010 to $US59,208 million in the year 2011(Annual report of Rio Tinto, 2011). The liabilities rise up means the Rio Tinto tried to borrow money to live on the difficult time which lasting time is still uncertain. The net profit of Rio Tinto and other mining company decrease mainly because the commodity prices drop seriously. Commodity prices are formed by the interaction of global economic growth and costs of expanding supply of ommodities (Garnaut,n. d). According to Gurnauts article the coeval China resources boom China have been the main reason of laid-back energy and metals prices since the year 2003. The article also claimed that Chinese growth has been the egress of high investment rates and rapid increases in fringe race and the export share of production. The author believed that developing countries like China and India will still keep the commodity prices of ore in high level.In brief, although the financial and operating situation of the Rio Tinto is not well, the future of Rio Tinto will still be expectant because the demand o f developing will be strong. Hence, it will be a good choice to invest Rio Tinto. Reference list Garnaut, R 2012, The coeval China resources boom, The Australian Journal of Agricultural and Resource Economics, vol. 56, no. 2, pp. 222243 Rio Tinto Ltd, 2011, Annual Report viewed 5 August 2012 http//www. riotinto. com/annualreport2011/pdf/rio_tinto_2011_annual_report. pdf Wikipedia2012, Rio Tinto Group, viewed 26 October 2012, http//de. wikipedia. org/wiki/Rio_Tinto_Group