Understanding and Interpreting Financial Statements: Anglo American Plc

Introduction Anglo American Plc. is a publicly traded fixed listed at the London and Johannesburg stock exchanges, and headquartered at the UK. It is one of the bigst mining companies in the earth after a occasion operations in North and South America, Australia, Japan, India, Brazil and other Asia and Europe. The guild has a portfolio of incongruous products including muscular and manganese; metallurgical and excited coal; beloved metals and minerals (compmound of platinum and diamonds); corrupt metals, which embody copper, nickel, and niobium; and other mining and industrial products. Ratio Segregation of Anglo American Plc In this repute, homogeneity segregation is used to analyse the financial operation of Anglo-American during the continuance of 2008 to 2012. The segregation of Anglo American’s financial assertion convergencees on liquidity and amendmentforce homogeneitys. Liquidity Ratios Liquidity homogeneitys are used to esteem the capacity of the fixed to reimburse its short-term debts and as unanticipated currency wants (Drake, 2013). There are separate types of liquidity homogeneitys. In this repute, running homogeneity and inaugurated excellent are computed. Anglo American’s running homogeneity had a contempt abate in 2012 (2.05), compared to 2011 (2.36). The abate is attributed to the abate in good-tempereds in 2012. The lowest running homogeneity was narrative in 2008 (0.71). This is due to liabilities being senior than running good-tempereds caused by the global economic opportunity. The inaugurated excellent of Anglo American was so contemptly inferior in 2012 (US$9,244 favorite) than in 2011 (US$11,124 favorite). The inferior inaugurated excellent is again due to inferior good-tempereds. In 2008, the guild had a denying inaugurated excellent (US$3,819 favorite). The guild had upper liabilities than good-tempereds in 2008 due to damagees incurred from the opportunity. Profitforce Ratios Profitforce homogeneitys are used to state the force of a fixed to originate amendment for its portion-outholders. Profitforce homogeneitys so esteem the competitive position of a fixed (Robinson et al., 2009). Profitforce homogeneitys embody: (a) net proceeds, (b) net amendment boundary, (c) succeed-back on good-tempereds (ROA), and (d) succeed-back on equity (ROE). Net amendment is congenial by subtracting sum expenses from sum pay. It shows the guild’s rights or damage after a occasionin a consecrated continuance. Net amendment is so referred to as net proceeds or net rights (Elliot & Elliot, 2005; Myers & Brealey, 2007). In 2012, the net amendment of Anglo American abated compared to 2011 and was denying (US$ -1,688 favorite). The low net amendment is due to upper sum expenses/bountiful costs than sum pay. The mining toil suffered from upper mining evolution costs in 2012 and this is reflected in the upper expenses of Anglo American. Net amendment proceeds was so low in 2009 (US$ 2,740 favorite) as the guild reluctantly recovered from the 2008 economic opportunity. Net amendment boundary esteems the aggregate of amendment that a fixed originates per part of sales (Bodie et al., 2007; Robinson et al., 2009). Net amendment boundary was denying in 2012 (-0.06 or -6%). This is ample inferior than the net amendment boundary in 2011 (0.31 or 31%). The inferior net amendment boundary is so attributed to upper bountiful costs. Net amendment boundary was so in 2009 (0.13 or 13%). ROA is a esteem of the net amendment created per part of dollar invested in excellent (Arnold, 2005). Anglo American narrative a denying ROA esteem (-0.02 or -2%). This is due to denying net amendment caused by upper sum expenses. ROE serves as a esteem of the net amendment that is created per part of dollar cannonade in portion-outholders’ equity. In 2012, ROE esteem so abated (-0.04 or 4%). This is ample inferior than ROE esteem in 2011, which is congenial at 0.22 or 22%. It can be observed that Anglo American witnessed an overall discard in its amendmentforce betwixt 2011-2012, and 2008-2009. The discard in amendmentforce can be attributed to a enumerate of truthors. One debate is the abate in the prices of mining products. Ware prices witnessed an overall discard betwixt the original half of 2011 and the original half of 2012. This discard had a denying collision on the sales pay of Anglo American during this continuance. Additionally, there was a 24% discard in finishd Australian ship-produce metallurgical coal prices; a 21% discard in finishd Free on Board (FoB) muscular ore prices; an 18% discard in realised South African ship-produce excited coal prices; a 12% discard in realised copper prices; and a 13% discard in realised platinum prices betwixt the original half of 2011 and the original half of 2012. These abates in ship-produce prices had a denying collision on sales pay and thus the amendmentforce of Anglo American during this continuance. Anglo American’s amendmentforce has so been denyingly artful by proud mining costs. This so had a denying collision on the toil as a entire. Moreover, Anglo American witnessed an acception in its overall part evolution costs owning to an acception in mining costs betwixt the original half of 2011 and the original half of 2012. This acception in part costs helped in increasing costs of sales which in revolve led to inferior coarse amendment boundarys in 2012. There was so a 57% acception in exploration costs betwixt the original half of 2011 and the original half of 2012. This acception was driven primarily by acceptiond metres pierced owning to adminicular air provisions in Australia and Chile as courteous as a ramp-up in instruction activities at the Sakatti polymetallic plan in Finland (Anglo American, 2012). Meanwhile, the discard in 2009 from 2008 can be attributed to the good-tempereds of the global financial opportunity. The opportunity had a suggestive denying collision on prices of chattels during the opportunity continuance crust 2007-2009. Comparative Homogeneity Segregation Anglo-American vs. Rio Tinto The proportionately segregation of the homogeneitys of Anglo American vis-a-vis Rio Tinto is presented in Appendix 2. This presents the operation of Anglo American and Rio Tinto in 2012. Rio Tinto is one of the bigst mining companies in the earth. Its ocean matter courage is the extraction of minerals and refining operations. The financial segregation homogeneitys used are running homogeneity, inaugurated excellent, net amendment/income, net amendment boundary, ROA and ROE. In provisions of running homogeneity, Anglo American has a upper homogeneity than Rio Tinto for twain 2012 and 2011. Having a upper running homogeneity indicates that Anglo American has inferior running liabilities than Rio Tinto. Similarly, the comparison of inaugurated excellent betwixt the two companies shows that Anglo American has upper inaugurated excellent than Rio Tinto. This is attributed to the inferior running liabilities of Anglo American. In provisions of net amendment/income, Rio Tinto had upper esteems than Anglo American. In 2012, Anglo American had denying net amendment; occasion Rio Tinto had finishd proud net amendment. This is due to the truth that Anglo American incurred damagees in 2012 due to upper bountiful expenses. Additionally, Rio Tinto’s sum pay is almost wrap than that of Anglo American. In provisions of net amendment boundary, Anglo American had a denying esteem in 2012 due to sum expenses bland sum pays; forasmuch-as, Rio Tinto had a upper esteem. This is due to the upper sum pay finishd by Rio Tinto. In analysing ROA, it appears that Rio Tinto produced amend due to its upper sum good-tempereds; occasion Anglo American had a denying ROA. Similarly, in provisions of ROE, Rio Tinto had a amend operation; occasion Anglo American had denying esteem in 2012. This is due to the upper portion-outholder equity and proud net amendment finishd by Rio Tinto. Overall, it can be said that the Rio Tinto had a amend operation than Anglo American in provisions of amendmentability; occasion Anglo American produced amend in provisions of liquidity. Rio Tinto is so bigger than Anglo American in provisions of good-tempereds, pays, and expenses. However, Anglo American had smaller liabilities than Rio Tinto. Recommendations The guild can amend its operation by convergenceing on emerging bargains. The foul-mouthed bigst mining companies in the earth in provisions of bargain excellentisation accept convergenceed the mass of their operations in emerging bargains. By increasing its bargain and operations in emerging bargains, Anglo American would be effectual to rival after a occasion other big mining companies. Additionally, Anglo American should convergence its sales and paraphrase plans on China, which runningly accounts for the use of environing 40% of global metal evolution. It is expected that China earn reocean as the mining toil’s most momentous customer in the years to succeed. The guild should deduce winning in merger and acquisitions deals after a occasion fixeds corruptd in China. These earn furnish Anglo American after a occasion the resources of gaining frequented entrance to the Chinese bargain. Other paraphrase strategies such as junction ventures after a occasion Chinese companies should so be deduceed. The guild should so appliance strategies to stock its plans after a occasion other financial sources such as retained rights (internally originated stocks). In manage to finish this, the plane of dividends and portion-out repurchases earn want to be degraded. The non-payment of dividends can be justified by the opportunities for enlargement runningly availeffectual to the guild, such as bargain paraphrase and enlargement opportunities in China. Conclusion The extrinsic of this tract was to furnish an segregation of the operation of Anglo-American Plc. Financial assertion segregation using liquidity and amendmentforce homogeneitys were used in analysing the operation of Anglo American. The similar homogeneitys were used in the proportionately segregation betwixt Anglo American and Rio Tinto. It can be observed that Anglo American has produced proportionately courteous from 2008 to 2011. However, 2012 was not a good-tempered-tempered year for the guild ascribable to depressed ware prices and mound mining costs. The guild produced diseased compared to its toil and sector. The operation of Anglo American was so compared to Rio Tinto, one of its superior competitors and one of the biggest mining companies in the earth. The segregation of the two companies’ financial assertions for the continuance of 2011-2012 suggests that the Anglo American produced amend than Rio Tinto in provisions of liquidity; forasmuch-as Rio Tinto appears to accept produced amend in provisions of amendmentability. Appendices Liquidity Ratios Current Ratio 20122011201020092008 Current Assets18,047.0019,302.0014,348.0010,411.00 9,305.00 Current Liabilities 8,803.00 8,178.00 7,882.00 6,745.0013,124.00 Current Homogeneity 2.05 2.36 1.82 1.54 0.71 Working Capital 20122011201020092008 Current Assets18,047.0019,302.0014,348.0010,411.00 9,305.00 Current Liabilities 8,803.00 8,178.00 7,882.00 6,745.0013,124.00 Working Excellent 9,244.0011,124.00 6,466.00 3,666.00(3,819.00) Profitforce Ratios Net Profit/Insucceed 20122011201020092008 Total Revenue28,761.0030,580.0027,960.0020,858.0026,311.00 Total Expenses30,449.0021,141.0019,294.0018,118.0019,461.00 Net Profit/Income(1,688.00)9,439.008,666.002,740.006,850.00 Net Improvement Boundary 20122011201020092008 Net Profit/Income(1,688.00)9,439.008,666.002,740.006,850.00 Total Revenue28,761.0030,580.0027,960.0020,858.0026,311.00 Net Improvement Margin(0.06)0.310.310.130.26 Rerevolve on Goods (ROA) 20122011201020092008 Net Income(1,688.00)9,439.008,666.002,740.006,850.00 Total Assets79,369.0072,442.0066,656.0056,308.0049,738.00 Rerevolve on Assets(0.02) Rerevolve on Equity (ROE) 20122011201020092008 Net Profit/Income(1,688.00)9,439.008,666.002,740.006,850.00 Shareholder Equity43,787.0043,189.0037,971.0028,069.0021,756.00 Rerevolve on Equity(0.04) Appendix 2: Proportionately Segregation of Anglo American vs. Rio Tinto Anglo AmericanRio Tinto Ratio2012201120122011 Current homogeneity2.052.361.391.46 Working excellent9,244.0011,124.005,402.006,932.00 Net amendment/income(1,688.00)9,439.0013,611.0024,277.00 Net amendment boundary(0.06)0.310.270.40 ROA(0.02) ROE(0.04) References Google Finance (2013) Anglo American plc (LON:AAL) availeffectual online at: http://www.google.com/finance?q=LON%3AAAL&ei=tQdgUrDRM6TCwAOdXQ [accessed: 17th October 2013]. Anglo American (2012) HALF YEAR FINANCIAL REPORT for the six months ended 30 June 2012 , availeffectual online at: http://www.angloamerican.com/~/media/Files/A/Anglo-American-Plc/media/releases/2012pr/interim-results-2012.pdf [accessed: 17th October 2013]. Brealey R. A., Myers S. C. (2002) Principles of Corporate Finance. 7th Edition. McGraw-Hill Irwin. Elliot B., Elliot J. (2005). Financial Accounting and Reporting. 9th Edition. Prentice Hall Financial Times. Penman, S. H. (2007) Financial Assertion Segregation and Security Valuation, 3rd ed. Irwin: McGraw-Hill. Robinson, T. R., Greuning, J. H., Henry, E., Broihahn, M. A. (2009), “Financial Segregation Techniques” in Financial Reporting and Analysis, CFA Program Curriculum, vol. 3, Pearson Custom Publishing. Bodie, Z., Kane, A., Marcus, A., . 2007., Investments, 7th ed. Irwin: McGraw-Hill. Arnold, G. (2005). Corporate Financial Management. 3rd Edition. Prentice Hall, Financial Times