Based only upon the “Annual Results 2019” of Rio Tinto.
(1) Using the group balance sheet (p37), calculate Rio Tinto’s: (a) current ratio, and (b) financial leverage. In your view, and using both Rio Tinto’s income statement (p32) and cash flow statement (p35) in addition to its balance sheet, does Rio Tinto have significant amounts of debt , or any potential problems in being able to settle its liabilities in general? (40%)
(2) The following is stated on p1: Rio Tinto Chief Executive J-S Jacques said “We have again delivered strong financial results with underlying EBITDA of $21.2 billion, underlying EBITDA margin of 47% and return on capital employed of 24%. This performance allows us to return a record final ordinary dividend of $3.7 billion, resulting in a full-year ordinary dividend of $6.2 billion and total cash returns of $7.2 billion.” Explain where in the financial statements the metrics that J-S Jacques is using can be found, and comment on why you think these metrics are highlighted in preference to others. (30%)
(3) What caused the impairment loss relating to Copper & Diamonds, at Oyu Tolgoi in Mongolia, how was the amount of the loss estimated, and what effect did this have on the financial statements? (30%)
The total word count is 3000. Word counts cover the main body of text, including tables, figures, and diagrams, and excluding appendices, footnotes, and references.
