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Rio Tinto PLC  (NYSE:RIO) Altman Z-Score: 2.06 (As of Today)

Rio Tinto PLC has a Z-score of 2.06, indicating it is in Grey Zones. This implies that Rio Tinto PLC is in some kind of financial stress. If it is below 1.81, the company may faces bankrupcy risk.

The zones of discrimination were as such:

When Z-Score is less than 1.81, it is in Distress Zones.
When Z-Score is greater than 2.99, it is in Safe Zones.
When Z-Score is between 1.81 and 2.99, it is in Grey Zones.

NYSE:RIO' s Altman Z-Score Range Over the Past 10 Years
Min: 0.76   Max: 4.7
Current: 1.99

0.76
4.7

During the past 13 years, Rio Tinto PLC's highest Altman Z-Score was 4.70. The lowest was 0.76. And the median was 1.84.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Rio Tinto PLC Annual Data

Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16
Altman Z-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 1.37 1.69 1.84 1.21 1.71

Rio Tinto PLC Semi-Annual Data

Dec07 Jun08 Dec08 Jun09 Dec09 Jun10 Dec10 Jun11 Dec11 Jun12 Dec12 Jun13 Dec13 Jun14 Dec14 Jun15 Dec15 Jun16 Dec16 Jun17
Altman Z-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 0.00 1.21 0.00 1.71 0.00

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Calculation

Z-Score model is an accurate forecaster of failure up to two years prior to distress. It can be considered the assessment of the distress of industrial corporations.

Rio Tinto PLC's Altman Z-Score for today is calculated with this formula:

Z=1.2*X1+1.4*X2+3.3*X3+0.6*X4+1.0*X5
=1.2*0.0641+1.4*0.2423+3.3*0.0799+0.6*1.6769+1.0*0.3784
=2.06

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Trailing Twelve Months (TTM) ended in Jun. 2017:
Total Assets was $89,263 Mil.
Total Current Assets was $15,086 Mil.
Total Current Liabilities was $9,362 Mil.
Retained Earnings was $21,631 Mil.
Pre-Tax Income was $6,343 Mil.
Interest Expense was $-787 Mil.
Revenue was $33,781 Mil.
Market Cap (M) (Today) was $83,801 Mil.
Total Liabilities was $49,973 Mil.

X1=Working Capital/Total Assets
=(Total Current Assets - Total Current Liabilities)/Total Assets
=(15086 - 9362)/89263
=0.0641

X2=Retained Earnings/Total Assets
=21631/89263
=0.2423

X3=Earnings Before Interest and Taxes/Total Assets
=(Pre-Tax Income + Interest Expense)/Total Assets
=(6343 + -787)/89263
=0.0799

X4=Market Value Equity/Book Value of Total Liabilities
=Market Cap (M)/Total Liabilities
=83800.600/49973
=1.6769

X5=Revenue/Total Assets
=33781/89263
=0.3784

The zones of discrimination were as such:

Distress Zones - 1.81 < Grey Zones < 2.99 - Safe Zones

Rio Tinto PLC has a Z-score of 2.06 indicating it is in Grey Zones.

Study by Altman found that companies that are in Distress Zone have more than 80% of chances of bankruptcy in two years.


Explanation

X1: The Working Capital/Total Assets (WC/TA) ratio is a measure of the net liquid assets of the firm relative to the total capitalization. Working capital is defined as the difference between current assets and current liabilities. Ordinarily, a firm experiencing consistent operating losses will have shrinking current assets in relation to total assets. Altman found this one proved to be the most valuable liquidity ratio comparing with the current ratio and the quick ratio. This is however the least significant of the five factors.

X2: Retained Earnings/Total Assets: the RE/TA ratio measures the leverage of a firm. Retained earnings is the account which reports the total amount of reinvested earnings and/or losses of a firm over its entire life. Those firms with high RE, relative to TA, have financed their assets through retention of profits and have not utilized as much debt.

X3, Earnings Before Interest and Taxes/Total Assets (EBIT/TA): This ratio is a measure of the true productivity of the firm's assets, independent of any tax or leverage factors. Since a firm's ultimate existence is based on the earning power of its assets, this ratio appears to be particularly appropriate for studies dealing with corporate failure. This ratio continually outperforms other profitability measures, including cash flow.

X4, Market Value of Equity/Book Value of Total Liabilities (MVE/TL): The measure shows how much the firm's assets can decline in value (measured by market value of equity plus debt) before the liabilities exceed the assets and the firm becomes insolvent.

X5, Revenue/Total Assets (S/TA): The capital-turnover ratio is a standard financial ratio illustrating the sales generating ability of the firm's assets.

Read more about Altman Z-score and the original research.


Be Aware

Z score does not apply to financial companies.


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