Johnson Financial Analysis Essay
Financial Analysis Report for Johnson & Johnson
Strategic Management
Table of Contents
I. Introduction
II. Summary of Operations
a. Net sales
b. Gross margin
c. Operating margin
d. Income before taxes
e. Net income
f. Summary of operations data assessment/interpretation
III. Financial Position
a. Working capital
b. Net property, plant & equipment
c. Total assets
d. Long term assets
e. Stockholders’ equity
f. Financial position data assessment/interpretation summary
IV. Financial Ratios
a. Liquidity
b. Leverage
c. Profitability
d. Efficiency
e. Financial ratios data assessment/interpretation summary
V. Historical View of Financial …show more content…
Performance
a. Comparisons with two major competitors
b. Comparison with industry standards
c. Supplemental data
d. Historical financial performance and 3-year trend analysis data assessment/interpretation summary
Appendices
Appendix A: Balance Sheet
Appendix B: Balance Sheet
Appendix C: Balance Sheet
Introduction
Johnson & Johnson is a name brand, which is known for providing quality products to consumers.
The company focuses on the development of products related to health and well-being. The company has more than 275 companies, which are located in 60 different countries. It is the world’s sixth-largest consumer health company, the world’s eighth-largest pharmaceuticals company, the world’s fifth-largest biologics company, the world’s largest diagnostics company, and provides the world’s largest and most diverse medical devices (Our Company, n.d.)
Summary of Operations
Financial Position
Johnson & Johnson’s working capital has steadily increased over the last 3-years. It increased from $9,529 (millions) in 2010 to $11,141 (millions) in 2011. It continued to increase to $12,973 (millions) in 2012.
Johnson & Johnson’s net property, plant, and equipment increased over the last 3-years. The net value of the company’s fixed assets increased from $14,553 (millions) in 2010 to $16,097 (millions) in 2012.
The total assets for the company have increased over the last 3-years. It was $102,908 (millions) in 2010, which increased to $113,644 (millions) in 2011. In 2012, it increased to $121,347 …show more content…
(millions).
The company’s long-term assets have increased over the last 3-years. It was $55,601 (millions) in 2010, $59,328 (millions) in 2011, and $75,231 (millions) in 2012
The stockholder’s equity has increased over the last 3-years. It went from $56,579 (millions) in 2010 to $57,080 (millions) in 2011. In 2012, it increased to $64,826 (millions).
Financial Ratios The liquidity ratio measures the adequacy of Johnson & Johnson’s cash resources to meet its short-term obligations. It is calculated as current assets divided by current liabilities. The company’s current ratio increased from 2010 to 2011. It then declined significantly from 2011 to 2012. It went from 2.05 to 2.38, then down to 1.9. Normally, it is good to have a low liquidity ratio, such as 1. Johnson & Johnson’s liquidity ratio has improved over the last 3-years. The current liquidity ratio indicates it is able to pay or cover its short-term debts (Kokemuller, n.d.).
The leverage ratio measures the shareholders’ equity to debt, which was used to fiancé the company’s assets. A low ratio number indicates there is less of a claim on company assets by the debt holder, which means a lower risk. The company showed a 0.2965 in 2010, which is really low. It increased to 0.3439 the next year, which means the company had a slightly higher risk. In 2012, the ratio dropped down to 0.2494 (Johnson & Johnson Debt, n.d.).
The profitability ratio includes both the gross profit margin and the operating profit margin.
The gross profit margin is calculated as gross profit divided by sales. The gross profit margin percentage measures the percentage of sales dollars remaining after the company has paid for its goods. In 2010, the gross profit margin was 69.49%. It declined to 68.69% in 2011. In 2012, the gross profit margin declined even further to 67.78%. The operating profit margin is calculated as operating earnings divided by sales. The operating profit margin measures the percentage of sales dollars remaining after all costs and expenses other than interest and taxes are deducted. It is the pure profits earned from the sales dollar. A higher operating profit margin is preferred. In 2010, the operating profit margin was 26.84%. In 2011, it declined to 23.96%. In 2012, it continued to decline to
23.61%.
The efficiency ratio is an indication of how effective the company has utilized its assets, how fast it collects revenue, and how quickly it can sell its inventory. Asset turnover is calculated as sales divided by average total assets.
Accounts receivable is calculated as sales divided by average accounts receivable.
Inventory turnover is calculated as cost of goods sold divided by average inventory.
Fixed asset turnover is calculated as sales divided by average fixed assets.
Working capital accounts payable turnover is calculated as accounts receivable turnover plus inventory turnover.
Historical View of Financial Performance
References
Johnson & Johnson Annual Report 2010. (n.d.). Retrieved April 17, 2013, from Johnson &
Johnson website: http://www.jnj.com/wps/wcm/connect/JnJ.Com%20Development/development/pdf/publications-pdf/2010+annual+report?contentIDR
Johnson & Johnson Annual Report 2011. (n.d.). Retrieved April 17, 2013, from Johnson &
Johnson website: http://www.jnj.com/wps/wcm/connect/JnJ.Com%20Development/development/pdf/publications-pdf/2011-annual-report_final.pdf?co
Johnson & Johnson Annual Report 2012. (n.d.). Retrieved April 17, 2013, from Johnson &
Johnson website: http://files.shareholder.com/downloads/JNJ/2374594897x0x644760/85FD0CFF-2305-4A02-8294-2E47D0F31850/JNJ2012annualreport.pdf Johnson & Johnson Debt to Equity Ratio. (n.d.). Retrieved April 19, 2013, from http://ycharts.com/companies/JNJ/debt_equity_ratio Kokemuller, N. (n.d.). What Does it Mean When Your Quick Ratio is Below Industry?
Retrieved April 17, 2013, from Chron website: http://smallbusiness.chron.com/mean-quick-ratio-below-industry-20412.html Our Company. (n.d.). Retrieved April 17, 2013, from Johnson & Johnson website: http://www.jnj.com/connect/about-jnj/ http://www.stock-analysis-on.net/NYSE/Company/Johnson-Johnson#Ratios
Appendix A
Balance Sheet for 2012
Strategic Management
Table of Contents
I. Introduction
II. Summary of Operations
a. Net sales
b. Gross margin
c. Operating margin
d. Income before taxes
e. Net income
f. Summary of operations data assessment/interpretation
III. Financial Position
a. Working capital
b. Net property, plant & equipment
c. Total assets
d. Long term assets
e. Stockholders’ equity
f. Financial position data assessment/interpretation summary
IV. Financial Ratios
a. Liquidity
b. Leverage
c. Profitability
d. Efficiency
e. Financial ratios data assessment/interpretation summary
V. Historical View of Financial …show more content…
Performance
a. Comparisons with two major competitors
b. Comparison with industry standards
c. Supplemental data
d. Historical financial performance and 3-year trend analysis data assessment/interpretation summary
Appendices
Appendix A: Balance Sheet
Appendix B: Balance Sheet
Appendix C: Balance Sheet
Introduction
Johnson & Johnson is a name brand, which is known for providing quality products to consumers.
The company focuses on the development of products related to health and well-being. The company has more than 275 companies, which are located in 60 different countries. It is the world’s sixth-largest consumer health company, the world’s eighth-largest pharmaceuticals company, the world’s fifth-largest biologics company, the world’s largest diagnostics company, and provides the world’s largest and most diverse medical devices (Our Company, n.d.)
Summary of Operations
Financial Position
Johnson & Johnson’s working capital has steadily increased over the last 3-years. It increased from $9,529 (millions) in 2010 to $11,141 (millions) in 2011. It continued to increase to $12,973 (millions) in 2012.
Johnson & Johnson’s net property, plant, and equipment increased over the last 3-years. The net value of the company’s fixed assets increased from $14,553 (millions) in 2010 to $16,097 (millions) in 2012.
The total assets for the company have increased over the last 3-years. It was $102,908 (millions) in 2010, which increased to $113,644 (millions) in 2011. In 2012, it increased to $121,347 …show more content…
(millions).
The company’s long-term assets have increased over the last 3-years. It was $55,601 (millions) in 2010, $59,328 (millions) in 2011, and $75,231 (millions) in 2012
The stockholder’s equity has increased over the last 3-years. It went from $56,579 (millions) in 2010 to $57,080 (millions) in 2011. In 2012, it increased to $64,826 (millions).
Financial Ratios The liquidity ratio measures the adequacy of Johnson & Johnson’s cash resources to meet its short-term obligations. It is calculated as current assets divided by current liabilities. The company’s current ratio increased from 2010 to 2011. It then declined significantly from 2011 to 2012. It went from 2.05 to 2.38, then down to 1.9. Normally, it is good to have a low liquidity ratio, such as 1. Johnson & Johnson’s liquidity ratio has improved over the last 3-years. The current liquidity ratio indicates it is able to pay or cover its short-term debts (Kokemuller, n.d.).
The leverage ratio measures the shareholders’ equity to debt, which was used to fiancé the company’s assets. A low ratio number indicates there is less of a claim on company assets by the debt holder, which means a lower risk. The company showed a 0.2965 in 2010, which is really low. It increased to 0.3439 the next year, which means the company had a slightly higher risk. In 2012, the ratio dropped down to 0.2494 (Johnson & Johnson Debt, n.d.).
The profitability ratio includes both the gross profit margin and the operating profit margin.
The gross profit margin is calculated as gross profit divided by sales. The gross profit margin percentage measures the percentage of sales dollars remaining after the company has paid for its goods. In 2010, the gross profit margin was 69.49%. It declined to 68.69% in 2011. In 2012, the gross profit margin declined even further to 67.78%. The operating profit margin is calculated as operating earnings divided by sales. The operating profit margin measures the percentage of sales dollars remaining after all costs and expenses other than interest and taxes are deducted. It is the pure profits earned from the sales dollar. A higher operating profit margin is preferred. In 2010, the operating profit margin was 26.84%. In 2011, it declined to 23.96%. In 2012, it continued to decline to
23.61%.
The efficiency ratio is an indication of how effective the company has utilized its assets, how fast it collects revenue, and how quickly it can sell its inventory. Asset turnover is calculated as sales divided by average total assets.
Accounts receivable is calculated as sales divided by average accounts receivable.
Inventory turnover is calculated as cost of goods sold divided by average inventory.
Fixed asset turnover is calculated as sales divided by average fixed assets.
Working capital accounts payable turnover is calculated as accounts receivable turnover plus inventory turnover.
Historical View of Financial Performance
References
Johnson & Johnson Annual Report 2010. (n.d.). Retrieved April 17, 2013, from Johnson &
Johnson website: http://www.jnj.com/wps/wcm/connect/JnJ.Com%20Development/development/pdf/publications-pdf/2010+annual+report?contentIDR
Johnson & Johnson Annual Report 2011. (n.d.). Retrieved April 17, 2013, from Johnson &
Johnson website: http://www.jnj.com/wps/wcm/connect/JnJ.Com%20Development/development/pdf/publications-pdf/2011-annual-report_final.pdf?co
Johnson & Johnson Annual Report 2012. (n.d.). Retrieved April 17, 2013, from Johnson &
Johnson website: http://files.shareholder.com/downloads/JNJ/2374594897x0x644760/85FD0CFF-2305-4A02-8294-2E47D0F31850/JNJ2012annualreport.pdf Johnson & Johnson Debt to Equity Ratio. (n.d.). Retrieved April 19, 2013, from http://ycharts.com/companies/JNJ/debt_equity_ratio Kokemuller, N. (n.d.). What Does it Mean When Your Quick Ratio is Below Industry?
Retrieved April 17, 2013, from Chron website: http://smallbusiness.chron.com/mean-quick-ratio-below-industry-20412.html Our Company. (n.d.). Retrieved April 17, 2013, from Johnson & Johnson website: http://www.jnj.com/connect/about-jnj/ http://www.stock-analysis-on.net/NYSE/Company/Johnson-Johnson#Ratios
Appendix A
Balance Sheet for 2012