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Essay / Research Paper Abstract
This 5 page paper examines two mining companies; Rio Tinto and BHP looking at how risk may be assessed by investors and creditors and then compares at two firms, looking at the debt to equity ratio, liquidity within the firms and the beta. The bibliography cites 3 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEriotintorisk.rtf
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Unformatted sample text from the term paper:
will be the consideration of operational risk, and for firms such as Rio Tinto and BHP operating the mining industry risks may be assessed on the costs and benefits of
opening and running a mining operation. For the investors and creditors these risks are relevant, but there is a broader view taken, while the risks of individual projects may be
assessed as important to the firm, it is the risk associated with the firm itself that is important to the investors and creditors. The firm itself may have a number
of risky investments, but if there is good management and a spread of risk the firm may not present the same level of risk to the investors or creditors. To
assess which of the two firms is the most risky the first consideration should be the way risk is viewed by these two groups and then the identification of potential
measures of risk that may be used. When assessing risk the first consideration must be what risk is perceived as. For the investor there are two types of risk,
there is the risk itself to the capital. They are investing money in a firm, usually for an expected return, but the first level of risk must be to assess
the risk to the capital. If a firm des poorly then there is the potential it will enter into bankruptcy. In terms of return of a capital when a company
fails the shareholders are a low priority on the list of creditors and will usually fail to see any capital returned. If a firm does poorly and does not enter
into bankruptcy the capital value of the shares will decline sharply and the investor may make a severe loss. Therefore, the first of the consideration is for the survival of
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