Module 07 Financial Accounting Project - Analysis, Free Cash Flow, and Cash Conversion Cycle

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Module 05 -- Financial Accounting Project –

TransDigm Group Inc – Analysis and Return on Equity

Rasmussen College

Esther Tejada

Author Note

This research is being submitted on November 10, 2014, for Professor Mark Jonas

A141/ACG1033 Section 04 Financial Accounting II – 2014 Fall Quarter

Stockholders’ equity

The stockholder’s equity over the last two years under observation was USD 1,218,314 in 2012 and USD (336,381) in 2013. The major reason for the changes in stockholder’s equity over the two yeas under observation was the change in retained earnings, which declined form USD 689,229 in the FY2012 to USD (1,004,244) in the FY 2013. The major reason for the decline can be contributed to the declining net profits of the company, which declined from USD 324,969 in FY 2012 to USD 302,789 in FY 2013. The largest component of the stockholders equity in both years under observation was retained earnings, which were USD 689,229 in the FY2012 to USD (1,004,244) in the FY 2013.

Preferred Stock

The total authorized capital stock of the company was 224,400,000 shares of common stock, whereas authorized preferred stock was 149,600,000 shares. However in the two years under observation the i.e. FY 2012 and FY 2014 there were no preferred stocks outstanding.

Common Stock

The total authorized capital stock of the company was 224,400,000 shares of common stock with a par value of $0.01. In the FY 2012 the total number of shares outstanding for common stock was 52,157,225 whereas the figure in FY 2013 were 53,172,551.

Dividends

Company in both years under observation declared dividends. Special dividends declared during the FY 2012 were USD 12.85 per outstanding common shares whereas the figure for 2013 was USD 22 per outstanding common share. Total dividends paid in FY 2013 were USD 1,950,683.

Share repurchase

In the two years under observation the company had an ongoing share repurchase program. Under the program total shares repurchased in the FY 2012 were 11,300 costing USD 0.8 million. In the FY 2013 there were no share repurchases.

Return on equity

Return on equity according to Investopedia is calculated by dividing net income in a year by the shareholders equity. The figure represents a measure of the businesses profitability and highlights the profits company has generated using the finds provided by the shareholders. (Investopedia, ROE, n.d)

The return on equity in FY 2013 and FY 2012 is presented below:

Description	2013	2012
Net Income	302,789	324,969
Shareholders’ equity	(336,381)	1,218,834
Return on Equity	-90%	27%

References

216.139.227.101, (2014). TransDigm Group Inc. Annual Report 2013. Retrieved 11 November 2014, from http://216.139.227.101/interactive/tdg2013/

Investopedia, (2003). Return On Equity (ROE) Definition | Investopedia. Retrieved 11 November 2014, from http://www.investopedia.com/terms/r/returnonequity.asp