Rockwell Collins Inc, Financial Analysis

Table of Contents

Introduction1

History1

Building block financial statement analysis1

Short term liquidity2

Measurement of short term liquidity2

Current ratios2

Current ratio2

Quick ratio3

Interest coverage ratio3

Cash flow and forecasting3

Capital structure and solvency4

Debt to equity ratio5

Return on capital invested5

Return on common equity5

Asset turnover5

Profit margin ratio6

Operating performance and profitability6

Profitability ratios6

Cash conversion cycle7

Conclusion8

Reference9

Rockwell Collins Inc, Financial Analysis

Introduction

History

Base of the Rockwell Collins is with Collins radio since 1933. After 1933, Collins Radio Company expanded its business, and starts serving other areas by expanding it technology scope. New technological developments such as flight control devices, radio communication equipments and voice transmission satellite created market opportunity for Collins Radio Company. In 1973, Rockwell international acquired Collins Radio Company due to company financial difficulties. In June 2001, Rockwell Collins inc. was listed on the stock exchange under the symbol “COL”.

Now, Rockwell Collins is in business of electronic communications, entertainment systems in flight and avionic for its various worldwide customers. Company is serving government, military and commercial customers (Rockwell Collins Inc, 2013a).

Today approximately every aircraft in the world is Rockwell Collins aviation systems. In US, approximately 70 percent of ground and air communication is with their equipments (Rockwell Collins Inc, 2013b).

Rockwell Collins is focused on innovation and believes that coming era will bring efficiency and safety in aviation electronics and flight operations. They are prepared to face these challenges. Company also positioned their importance on Boeing and Airbus (Rockwell Collins Inc, 2013a).

Building block financial statement analysis

(Bernstein & Wild, 1999) financial statement analysis on one or more component of organization's financial status or operating outcomes. Building blocks financial statement analysis are follows:

Short term liquidity - organization's ability to cover its short term commitments.

Cash flow and forecasting - firm's ability generates enough revenues for future outlook.

Capital structure and solvency - ability of the firm to meet long term commitments.

Return on capital employed - firm's ability to generate financial rewards to attract and maintain significant investments.

Asset turnover - strength of assets in generating significant profits.

Operating performance and profitability - optimizing operational activities in long run. It includes maximizing revenues and minimizing costs.

They further argued that building block to financial statement analysis considers:

Objectives related to analysis.

Important relation among the building blocks.

For instance, an equity investor might look for return on capital employed or invested because it focus on earning and return analysis. However, investor is to look at other block, because of their influence on specific requirement. But all six block focus on a different side of company's condition and performance. But they are interconnected with each other and the change in one block may bring significant impact on other block.

Short term liquidity

(Sinha, 2009) Focuses on the importance of short term liquidity, because firm required converting it assets into cash on to meet its due commitments. Meeting commitments on time leads firms to enjoy discounts and profitable advantages. Vice versa, if company unable to meet its commitments creates difficulties in getting profitable opportunities.

Measurement of short term liquidity

Mostly, working capital is to measure short-term liquidity because working capital is an important source for meeting short ...