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Financial Analysis on Rio Tinto Australian Company Assignment Answers
Rio Tinto Group is an Anglo-Australian multinational and the world’s second-largest metals and mining corporation, behind BHP, producing iron ore, copper, diamonds, gold and uranium.
In order for individuals and the group to review the group process, a group evaluation will be conducted at the end of the group assignment. This is primarily for your use. Please take time to conduct this review, as it provides an opportunity for improving the group process for continuation of the assignment. A photocopy of this evaluation will be submitted with the group assignment.
Assignment requirements:
- Download all available financial data for Rio Tinto Ltd (ASX Code: RIO) from Data Analysis Premium (Murdoch library’s databases).
- Give a brief description of
- Explain the purpose of financial statement
- Analyse the firm’s current operation using its financial statements (i.e. income statement, balance sheet and cash-flow statement). You should also take into account supply and demand factors (i.e. you need to look at the market conditions at both industry and economy levels).
- Download the S&P/ASX 200 from Yahoo Finance website and calculate the rate of return for S&P/ASX
- Using the Capital Asset Pricing Model and an appropriate government bond yield as the risk-free interest rate and the result from (5) to calculate the required rate of return for RIO.
- Use an appropriate dividend valuation model to value RIO’s shares (Hint: use the total dividend figures).
- Draw graphs for RIO’s adjusted share price and return (you can use daily, monthly or quarterly return). Compare the company’s share price and return with your analyses in questions (6) and (7) above.
- Use the information and results from your analyses in questions 4-8 above; identify areas of cash flows (i.e. operating, investing and financing) where the firm needs to pay attention
- Suggest relevant investment and financing strategies to improve the firm’s cash flow position.
- Justify your recommendation in terms of shareholders’ wealth
Note: You should use data for the period 2010-2020 in your analysis.
Hint: Look at the entire operation of the company from a finance perspective as well as the growth prospect of the company with a focus on changes in the company’s cash flows over time.
Financial Analysis on Rio Tinto Coal Australian Public Listed Company
Report Submission:
Write a professional-looking report for the management of the selected company with your recommendation. Your recommendation(s) should be succinct and you need to highlight expected outcomes or possible financial consequences of your recommendations.
The report should not exceed 2,500 words plus appendices. The body of the report should be self-contained, while the appendices should provide further details for interested readers. It is your decision as to what to be included in your report and in the appendices. However, make sure they are relevant to your analysis.
You should state any assumption that you think necessary for your analysis. You should also report any difficulty encountered in obtaining the data for this assignment. It is up to you to decide which course of action is appropriate in the circumstances. I do not expect every group to use the same assumptions. However, I do expect your assumptions to be plausible and for you to justify them.
Referencing
Ensure you reference all sources of information used for the report. When indicating the source of a point-of-view / evidence it is essential to include the reference both in the body of your writing and in the bibliography.
The referencing style used in Finance in Chicago, where the author’s name(s) and the publication date of the reference are included in brackets after the relevant material and full details are provided in the bibliography. The Murdoch library website has information on referencing techniques. Under ‘Find’ type citation guides.
Recommended references:
In addition to your textbook, you should read at least the relevant chapters in the following references (available in reserve section in the library):
Penman, S.H., 2010. Financial Statement and Security Valuation. Fourth Edition, McGraw-Hill.
Peirson, G., Brown, R., Easton, S., Howard, P., and S. Pinder. 2012. Business Finance, 12th edition. Mc-McGraw-Hill, Australia.
Viney, C., 2009. McGrath’s Financial Institutions, Instruments and Markets, 6th edition, McGraw- Hill, Australia.
Pike, R. And B. Neale, 2009, Corporate Finance and Investment: Decisions and Strategies, 6th edition, Financial Times Prentice Hall, Limited.
You might also find the following websites useful:
Australian Securities Exchange: https://www.asx.com.au/
Australian Prudential Regulation Authority: www.apra.gov.au
Australian Financial Markets Association: www.afma.com.au
Australian Taxation Office: www.ato.go.au
Australian Securities and Investments Commission: www.asic.gov.au
Reserve Bank of Australia: www.rba.gov.au
Australian Financial Review: www.afr.com
New York Stock Exchange: www.nyse.com
Yahoo Finance: https://au.finance.yahoo.com/
Accessing data from DatAnalysis Premium:
- Go to Murdoch Library on the web
- Select Journal
- Select F. Then select Fin
- Enter the ASX code or partial name and click search ( ).
- This will present the ‘Main View’. Use the menu to the left to access additional information.
Remember: You are expected to contribute fairly to your group’s assignment.
MBS546 GROUP ASSIGNMENT CASH FLOW ANALYSIS AND VALUATION OF SECURITY
The table below lists issues which may have been addressed when undertaking the analysis. However, you can include other relevant discussions if you wish. The word limit is considered when assessing the adequacy of the discussion.
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