Transdigm Group Incorporated (TDG)

Short-term

Turnover ratios

The activity ratios of Transdigm Group Incorporated indicate various aspects of the company's efficiency in managing its operations and resources.

1. Inventory Turnover: This ratio measures how many times a company's inventory is sold and replaced over a period. Transdigm's inventory turnover has been relatively stable over the past five years, ranging from 1.70 to 1.93 times. A higher ratio is generally preferred as it indicates faster inventory turnover and less idle inventory.

2. Receivables Turnover: This ratio shows how many times a company collects its accounts receivable during a period. Transdigm's receivables turnover has decreased from 7.09 to 5.75 times over the past five years. A higher ratio is favorable as it indicates more efficient collection of receivables.

3. Payables Turnover: The payables turnover ratio measures how quickly a company pays its suppliers. Transdigm's payables turnover has fluctuated but generally remained within the range of 8.35 to 11.27 times over the past five years. A higher ratio suggests that the company is managing its payables effectively by paying suppliers promptly.

4. Working Capital Turnover: This ratio indicates how efficiently a company is using its working capital to generate sales. Transdigm's working capital turnover has shown improvement, increasing from 0.95 to 2.15 times over the past five years. A higher ratio signifies that the company is utilizing its working capital effectively to support its operations and generate revenue.

Overall, the analysis of Transdigm's activity ratios suggests that the company has maintained stable inventory turnover, slightly decreased receivables turnover, fluctuating payables turnover, and improving working capital turnover over the past five years. This indicates a mixed performance in terms of operational efficiency and management of resources.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its assets and liabilities. Let's analyze the activity ratios of Transdigm Group Incorporated based on the data provided:

1. Days of Inventory on Hand (DOH):
- The DOH has been relatively stable over the past five years, ranging from 189.29 days to 215.03 days.
- A higher DOH value indicates that the company takes longer to sell its inventory, which may tie up capital and increase carrying costs.
- Transdigm Group's DOH indicates that it holds inventory for an extended period, which can potentially impact cash flow and profitability.

2. Days of Sales Outstanding (DSO):
- The DSO has shown a general increasing trend over the five-year period, indicating that it takes the company longer to collect revenue from its sales.
- A higher DSO value suggests delayed cash inflows and potential credit risks from customers.
- Transdigm Group's increasing DSO may signal challenges in managing accounts receivable efficiently and could impact liquidity.

3. Number of Days of Payables:
- The number of days of payables has fluctuated over the years but has remained within a relatively narrow range.
- A higher number of days of payables implies that the company takes longer to pay its suppliers, potentially improving cash flow by delaying cash outflows.
- The stable but varying trend in Transdigm Group's payables days may indicate the company's management of trade credit terms with suppliers.

Overall, Transdigm Group Incorporated's activity ratios suggest areas where the company can potentially improve efficiency, such as inventory management and accounts receivable collection. Monitoring these ratios over time can help evaluate the company's operational effectiveness and financial health.

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Long-term

The fixed asset turnover ratio for Transdigm Group Incorporated has been relatively stable over the past five years, hovering around 6 on average. This indicates that the company generates $6.00 in sales for every $1.00 invested in fixed assets. The consistency in this ratio suggests efficient utilization of fixed assets to generate revenue.

In contrast, the total asset turnover ratio has fluctuated more significantly, ranging between 0.25 and 0.33. This ratio indicates the company's ability to generate sales from its total assets. A lower total asset turnover ratio compared to the fixed asset turnover ratio suggests that the company may have a significant portion of assets that are not actively contributing to sales generation.

Overall, while the fixed asset turnover ratio reflects strong efficiency in utilizing fixed assets to generate revenue, the lower total asset turnover ratio suggests that there may be potential room for improvement in optimizing the utilization of total assets to drive sales.