Rio Tinto plc Essay Example | Topics and Well Written Essays - 1500 words

Rio Tinto plc - Essay Example The company has been able to generate an overall cash flow of $8.3billion showing an increase of 85%. This increase in cash flow has been achieved after making capital investment of $2.5 billion, a figure which has increase by 13% in the current year. (www.riotinto.com,2005). An analysis of the financial data from 2005 onwards suggest that the company has been able to increase its revenue from $19.033 Billion in 2005 to $29.700 Billion in 2007- an increase of more than 56%. The earnings per share of the company have increased from $3.81 to $5.67 in 2007. Operating Income of the company has been also consistently increasing from $ 6.92 billion in year 2005 to $8.571 in year 2007. (Reuters, 2008). Three years performance of the Rio Tinto suggests a very strong performance of the company. A more closer look at the performance of the company would suggest that the during 2005, company has been able to generate sales mostly through the sales of iron ore and copper whereas the same trend seem to be taking place in the years after 2005 also. Further more the comparison with the industry ratios in the year 2007 suggests that the company has been able to beat the industry in major ratios. The Price to Earnings ratio of 18.94 is higher as compared to the industry PE ratio of 13.62 whereas the other key ratios including the sales growth, EPS growth, working capital management ratios are better than the industry benchmarks. However it also must be noted the total debt to equity ratio of the company is higher than the industry ratios suggesting slightly higher degree of leverage being availed by the company as compared to the industry. On the whole strong stock performance coupled with the strong operational and financial performance of the company suggest a very solid and mature financial strength of the company along with better management of resources. Rio Tinto being one of the largest companies in the industry and being quoted at multiple stock