Rio Tinto Group, a British-Australian multinational corporation, is among the world leaders in the production of many

Question:

Rio Tinto Group, a British-Australian multinational corporation, is among the world leaders in the production of many commodities, including aluminum, iron ore, copper, uranium, coal, and diamonds. Reproduced below is the debt footnote from its 2012 financial statements. image text in transcribed

a. What is the amount of debt reported on Rio Tinto's, 2012, balance sheet?

b. What are the scheduled maturities for this indebtedness? Why is information relating to a company's scheduled maturities of debt useful in an analysis of its financial condition?

c. Rio Tinto reported $\$ 1,005$ million in interest expense in the notes to its 2012 financial statements. In its statement of cash flows, Rio Tinto indicates that the cash portion of this expense was $\$ 837$ million. What could account for the difference between interest expense and interest paid? Explain.

d. Rio Tinto's long-term debt is rated A3 by Moody's and A- by S\&P. What factors would be important to consider in attempting to quantify the relative riskiness of Rio Tinto compared with other borrowers? Explain.

e. Assume that the $4.125 \%$ Rio Tinto Finance bonds with a face value of $\$ 725$ million maturing in 2042 were trading at 96.2 , or $96.2 \%$ of par, as of December 2012. What is the market value of these notes on that date? How is the difference between this market value and the $\$ 725$ million face value reflected in Rio Tinto's financial statements? If the company had repurchased this entire note issue on December 31, 2012, what would have been the effect on Rio Tinto's financial statements? What does the 96.2 price tell us about the general trend in interest rates since Rio Tinto sold this bond issue? Explain.

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