You are required to examine the annual reports of both Newcrest Mining and Fortescue Metals Group for 2018 and present your answers to the following questions in the form of an executive report which will cover quantitative performance elements in a logical cohesive format.

1. Outline the method used in presenting the statement of cash flows for each company. If the direct method is used, identify whether an appropriate reconciliation has been reported in the notes to the accounts.

1. Examine the information in relation to cash flow from operating activities, cash flow from investing activities and cash flow from financing activities retrieved from the Newcrest Mining and Fortescue Metals Group financial reports and undertake a written analysis of the cash flow statement information given for Newcrest Mining and Fortescue Metals Group. Include in this analysis the computations of measuring Working Capital Ratio, Cash Flow Adequacy Ratio (Liquidity), Debt to Total Assets Ratio, Debt Coverage Ratio (Solvency), and the Cash Flow to Sales Ratio (Profitability). Comment on your findings related to these ratios.

2. Based on the analysis, you are required to make conclusions and recommendation which will answer the following questions:
   1. Which business would you expect to be a better short-term credit risk?
   2. Do you think both companies have adequate cash resources?
   3. Assess both companies ability to survive in the longer term.
   4. Which company is better at generating cash from their sales revenue?

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2018 2018 USS 2017 US&m Note 5(a) 5(b) 3.477 3,562 (2.749) 813 (60) (104) 130 (2.609) 868 (53) (84) (12) (5) 6,12 (269) (6) Sales revenue Cost of sales Gross profit Exploration expenses Corporate administration expenses Other income/expenses) Share of profit/loss) of associates Impairment loss on property.plant and equipment Impairment loss on investment in associate Write down of property.plant and equipment Loss on business divestment Net investment hedge gain/Closs) Profit before interest and income tax Finance income Finance costs Profit before income tax Income tax expense Profit after Income tax (87) (10) (79) 615 5(e) 29 441 8 (122) 327 (118) 209 (134) 483 (164) 19 7(a) 3 Profit after tax attributable to: Non-controlling interests Owners of the parent 7 202 308 319 209 Earnings per share (cents per share) Basic earnings per share Diluted earnings per share The above Statement should be read in conjunction with the accompanying notes. 8 8 26.3 26.2 40.2 40.0 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 Note 2018 US$m 209 2017 US$m 319 Profit after income tax Other comprehensive income/(loss) Items that may be reclassified subsequently to the Income Statement Cash flow hedges Cash flow hedge (gains)/losses transferred to the Income Statement Cash flow hedge gains/losses) deferred in equity Income tax expense 22(a) (35) (23) 44 (3) (19) Investments Share of other comprehensive income/loss) of associates (1) Foreign currency translation Exchange gains/losses) on translation of foreign operations, net of hedges of foreign investments Net investment hedge gain)/loss transferred to the Income Statement on business divestment, net of tax (130) 110 (29) 62 (159) 172 (154) 215 55534 Other comprehensive income/(loss) for the year, net of tax Total comprehensive income for the year Total comprehensive income attributable to Non-controlling interests Owners of the parent 11 7 48 55 523 534 The above Statement should be read in conjunction with the accompanying notes. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 2018 US$m 2017 US$m 492 953 77 554 88 556 26 54 56 1,249 1,672 1.125 10 8,852 Current assets Cash and cash equivalents Trade and other receivables Inventories Other financial assets Current tax asset Other assets Total current assets Non-current assets Inventories Other financial assets Property.plant and equipment Other intangible assets Deferred tax assets Investment in associates Other assets Total non-current assets Total assets Current liabilities Trade and other payables Provisions Current tax liability Other financial liabilities Total current liabilities Non-current liabilities Borrowings Provisions Deferred tax liabilities Other financial liabilities Total non-current liabilities Total liabilities Net assets 1,032 35 8.156 42 69 324 150 9,808 11,480 168 10,334 11,583 415 137 455 147 99 651 664 1,993 362 1,007 1,991 307 1,087 3,385 3,367 2018 4.018 7,462 4049 7,534 23 Equity Issued capital Accumulated losses Reserves Equity attributable to owners of the parent Non-controlling interests Total equity The above Statement should be read in conjunction with the accompanying notes. 11,656 (4,067) (194) 7,395 67 7,462 11,657 (4,154) (53) 7.450 84 7,534 98 FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 Note 2018 USSM 2017 USSM 327 483 791 333 689 104 132 53 50 18 142 (27) 1,606 621 (122) (110) (69) 1,434 (34) 1,467 (217) (160) (150) (72) (286) (193) (90) (58) Cash flows from operating activities Profit before income tax Adjustments for: Depreciation and amortisation Significant items Net finance costs Exploration expenditure written off Share of loss of associate Other non-cash items or non-operating items Change in working capital Operating cash flows before interest and taxes Interest received Interest paid Income tax paid Net cash provided by operating activities Cash flows from investing activities Payments for plant and equipment Assets under construction, development and feasibility expenditure Production stripping expenditure Exploration and evaluation expenditure Information systems development Proceeds from sale of property, plant and equipment Payments for investments in associates Cash inflow/outflow) on sale of subsidiary, net of cash held by the subsidiary Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings: Bilateral bank debt Repayment of borrowings: Bilateral bank debt Private placement notes Bank loan Payment for treasury shares Dividends paid Members of the parent entity Non-controlling interests Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The above Statement should be read in conjunction with the accompanying notes (13) 2 (275) (63) 30 48 (833) (27) (728) 20(e) 295 20(e) 20(e) 20(e) (320) (125) (20) (19) 23 (11) (105) (24) (140) 461 492 953 (105) (6) (300) 439 53 492 20 FX US CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 Attributable to Owners of the Parent Equity Accu Non Issued Translation Hedge Settlements Other mulated controlling 2018 Capital Reserve Reserve Reserve Reserves Losses Total Interests USSMUS$ M US$ US$ US$ US$m USSMU S$m Balance at 1 July 2017 11,657 (168) 27 8 8 - (4,154) 7,450 84 7,534 Profit for the year - 202 202 7 209 Other comprehensive income for the year - (159) (1) - (154) - Total comprehensive income for the year - (159) 6 - (1) 202487 Transactions with owners in their capacity as owners Share-based payments Shares purchased (11) Dividends - (115) (115) (24) (139) Shares issued - dividend reinvestment plan 10 10 Balance at 30 June 2018 11,656 (327) 33 101 (1) (4,067) 7,395 6 77,462 The above Statement should be read in conjunction with the accompanying notes. 13 13 (11) . Attributable to Owners of the Parent Non Accu mulated Losses controlling Interests Total US$ (4,347) 308 USS 7,041 308 US$ 79 11 US$m 7,120 319 215 215 523 - 11 308 534 Equity Issued Translation Hedge Settlements Other 2017 Capital Reserve Reserve Reserve Reserves USSM US$ US$ US$ US$ Balance at 1 July 2016 11,666 (340) (16) 78 - Profit for the year - Other comprehensive income for the year 17243 Total comprehensive income for the year - 17243 - Transactions with owners in their capacity as owners Share-based payments Shares purchased (19) Dividends Shares issued - dividend reinvestment plan 10 Balance at 30 June 2017 11,657 (168) 27 8 8 - The above Statement should be read in conjunction with the accompanying notes. 10 (19) (121) (115) (6) 10 (19) (115) 10 7,450 10 - 84 (4,154) 7,534 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2018 2018 USS 2017 US&m Note 5(a) 5(b) 3.477 3,562 (2.749) 813 (60) (104) 130 (2.609) 868 (53) (84) (12) (5) 6,12 (269) (6) Sales revenue Cost of sales Gross profit Exploration expenses Corporate administration expenses Other income/expenses) Share of profit/loss) of associates Impairment loss on property.plant and equipment Impairment loss on investment in associate Write down of property.plant and equipment Loss on business divestment Net investment hedge gain/Closs) Profit before interest and income tax Finance income Finance costs Profit before income tax Income tax expense Profit after Income tax (87) (10) (79) 615 5(e) 29 441 8 (122) 327 (118) 209 (134) 483 (164) 19 7(a) 3 Profit after tax attributable to: Non-controlling interests Owners of the parent 7 202 308 319 209 Earnings per share (cents per share) Basic earnings per share Diluted earnings per share The above Statement should be read in conjunction with the accompanying notes. 8 8 26.3 26.2 40.2 40.0 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 Note 2018 US$m 209 2017 US$m 319 Profit after income tax Other comprehensive income/(loss) Items that may be reclassified subsequently to the Income Statement Cash flow hedges Cash flow hedge (gains)/losses transferred to the Income Statement Cash flow hedge gains/losses) deferred in equity Income tax expense 22(a) (35) (23) 44 (3) (19) Investments Share of other comprehensive income/loss) of associates (1) Foreign currency translation Exchange gains/losses) on translation of foreign operations, net of hedges of foreign investments Net investment hedge gain)/loss transferred to the Income Statement on business divestment, net of tax (130) 110 (29) 62 (159) 172 (154) 215 55534 Other comprehensive income/(loss) for the year, net of tax Total comprehensive income for the year Total comprehensive income attributable to Non-controlling interests Owners of the parent 11 7 48 55 523 534 The above Statement should be read in conjunction with the accompanying notes. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 2018 US$m 2017 US$m 492 953 77 554 88 556 26 54 56 1,249 1,672 1.125 10 8,852 Current assets Cash and cash equivalents Trade and other receivables Inventories Other financial assets Current tax asset Other assets Total current assets Non-current assets Inventories Other financial assets Property.plant and equipment Other intangible assets Deferred tax assets Investment in associates Other assets Total non-current assets Total assets Current liabilities Trade and other payables Provisions Current tax liability Other financial liabilities Total current liabilities Non-current liabilities Borrowings Provisions Deferred tax liabilities Other financial liabilities Total non-current liabilities Total liabilities Net assets 1,032 35 8.156 42 69 324 150 9,808 11,480 168 10,334 11,583 415 137 455 147 99 651 664 1,993 362 1,007 1,991 307 1,087 3,385 3,367 2018 4.018 7,462 4049 7,534 23 Equity Issued capital Accumulated losses Reserves Equity attributable to owners of the parent Non-controlling interests Total equity The above Statement should be read in conjunction with the accompanying notes. 11,656 (4,067) (194) 7,395 67 7,462 11,657 (4,154) (53) 7.450 84 7,534 98 FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 Note 2018 USSM 2017 USSM 327 483 791 333 689 104 132 53 50 18 142 (27) 1,606 621 (122) (110) (69) 1,434 (34) 1,467 (217) (160) (150) (72) (286) (193) (90) (58) Cash flows from operating activities Profit before income tax Adjustments for: Depreciation and amortisation Significant items Net finance costs Exploration expenditure written off Share of loss of associate Other non-cash items or non-operating items Change in working capital Operating cash flows before interest and taxes Interest received Interest paid Income tax paid Net cash provided by operating activities Cash flows from investing activities Payments for plant and equipment Assets under construction, development and feasibility expenditure Production stripping expenditure Exploration and evaluation expenditure Information systems development Proceeds from sale of property, plant and equipment Payments for investments in associates Cash inflow/outflow) on sale of subsidiary, net of cash held by the subsidiary Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings: Bilateral bank debt Repayment of borrowings: Bilateral bank debt Private placement notes Bank loan Payment for treasury shares Dividends paid Members of the parent entity Non-controlling interests Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The above Statement should be read in conjunction with the accompanying notes (13) 2 (275) (63) 30 48 (833) (27) (728) 20(e) 295 20(e) 20(e) 20(e) (320) (125) (20) (19) 23 (11) (105) (24) (140) 461 492 953 (105) (6) (300) 439 53 492 20 FX US CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 Attributable to Owners of the Parent Equity Accu Non Issued Translation Hedge Settlements Other mulated controlling 2018 Capital Reserve Reserve Reserve Reserves Losses Total Interests USSMUS$ M US$ US$ US$ US$m USSMU S$m Balance at 1 July 2017 11,657 (168) 27 8 8 - (4,154) 7,450 84 7,534 Profit for the year - 202 202 7 209 Other comprehensive income for the year - (159) (1) - (154) - Total comprehensive income for the year - (159) 6 - (1) 202487 Transactions with owners in their capacity as owners Share-based payments Shares purchased (11) Dividends - (115) (115) (24) (139) Shares issued - dividend reinvestment plan 10 10 Balance at 30 June 2018 11,656 (327) 33 101 (1) (4,067) 7,395 6 77,462 The above Statement should be read in conjunction with the accompanying notes. 13 13 (11) . Attributable to Owners of the Parent Non Accu mulated Losses controlling Interests Total US$ (4,347) 308 USS 7,041 308 US$ 79 11 US$m 7,120 319 215 215 523 - 11 308 534 Equity Issued Translation Hedge Settlements Other 2017 Capital Reserve Reserve Reserve Reserves USSM US$ US$ US$ US$ Balance at 1 July 2016 11,666 (340) (16) 78 - Profit for the year - Other comprehensive income for the year 17243 Total comprehensive income for the year - 17243 - Transactions with owners in their capacity as owners Share-based payments Shares purchased (19) Dividends Shares issued - dividend reinvestment plan 10 Balance at 30 June 2017 11,657 (168) 27 8 8 - The above Statement should be read in conjunction with the accompanying notes. 10 (19) (121) (115) (6) 10 (19) (115) 10 7,450 10 - 84 (4,154) 7,534