Proposal and Final Submission

Johnson & Johnson Company Financial Analysis

From the financial reports of Johnson & Johnson, the total current assets for Johnson & Johnson as per Dec. 2018 were $46,033 million and $43,088 million as per Dec. 2017. Also, the total liabilities assets for the corporation were $31,230 million as per Dec 2018 and $30,537 million as per Dec 2017 (Vogel, 2016). Using this information, the current ratio for 2017 and 2018 for Johnson & Johnson can be calculated as follows; current ratio = current assets/ current liabilities. Therefore for 2017, current ratio = 43,088/ 30,537 = 1.41 and that for 2018 will be, = 46,033/31,230 = 1.47

Net Cash Flows from Operating Activities

This refers to the amount of cash inflow (outflow) from operating activities, not including discontinued activities. Operating activity cash flows include net change in property, net change acquisitions, as well as net change in investment. From the cash flow analysis of Johnson & Johnson, its cash net cash flows from operating activities increased from 2016 to 2017, that is from $18,767 million to $21,056 million and from 2017 to 2018, which is from $21,056 million to $22,201 million. This shows that the company is in good status financially in terms of cash expenditures (Ahmed, 2018).

Net Cash used by Investing Activities

This refers to the amount of cash inflow (outflow) of investing activities, not including discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets. Amount of cash inflow (outflow) of financing activities, excluding discontinued operations. From the Cash flow analysis for Johnson & Johnson’s, its net cash used by investing activities declined from 2016 to 2017, that is from $-4,761 million to $-14,868 million but then increased from 2017 to 2018 exceeding 2016 level that is from $-14,868 million to $-3,167 million. This shows that the corporation is growing as it used much of its cash in investments like building more facilities as well as investment in research (Jammaers, Zanoni, & Williams, 2019).

Net Cash used by Financing Activities

This refers to the amount of cash inflow (outflow) of financing activities, not including discontinued operations. Examples of financing activities include, repayment of debt, issuance of debt like bonds, payment of dividends, repurchase of the company stock as well as sale of stock. From the Cash flow analysis of Johnson & Johnson’s, its net cash used by financing activities increased from 2016 to 2017, that is from $-8,551 million to $-7,673 million but then declined significantly from 2017 to 2018, that is from $-7,673 million to $-18,510 million (Vochozka, Rowland, & Vrbka, 2016).

Cash and Cash Equivalents at the end of the Years

This refers to the amount that comes from the most liquid current assets from the organization’s balance sheet. This amount can also be termed as the net cash flow of the organization determined using a cash flow statement. From the cash flow analysis of Johnson & Johnson’s, its cash and cash flow equivalents decreased from 2016 to 2017, that is, from $5,240 million to $-1,148 million but it increased from 2017 to 2018, that is from $-1,148 million to $283 million (Post, & Byron, 2015).

Johnson & Johnson

Balance Sheet

December 31, 2018

December 31, 2018 December 31, 2018

Cash (million) $19,687 $18,296

Inventory 8,599 8,765

Other current assets 950 -

Total current assets $46,033 $43,088

Property and equipment 17,035 17,005

Goodwill and tangible assets 78,065 85,135

Other long-term assets 4,182 4,971

Total long-term assets 106,921 114,215

Total assets $152,954 $157,303

Total current liabilities 31,230 30,537

Total long-term liabilities 61,972 66,606

Total liabilities $93,202 $97,143

Shareholders’ equity 59,752 60,160

Total liabilities & Shareholders’ equity $152,954 $157,303

From the income statement of Johnson & Johnson the following trends can be identified;

First, the sales/revenue increases from 2015 all through to 2018. This is a positive indicator to both the organization as well as the investors because with constant increase in sales, it shows that the organization is growing (Dewachter, Iania, Lyrio, & de Sola Perea, 2015).

Secondly, the gross profit for Johnson & Johnson increased from 2015 to 2018. This shows a constant reduction in the cost of goods sold which is a positive indicator to both the organization as well as the investor because reduction in the cost of goods sold indicates high profits generation (Corbet, Lucey, Urquhart, & Yarovaya, 2019).

Thirdly, the net income increased from 2015 to 2016 but it again reduced in 2017. From 2017 to 2018 it also increased. This trend is not positively indicating to both the organization and the investors for it shows that the organization is still under stiff competition from other organizations offering the same services (Vogel, 2016).

From the financial statements of Johnson & Johnson, it was strong financially in the year 2016 with a Net income difference of (16,540 – 1,300) = $15,240 million from that of 2017 when it was weak financially (Tan, 2017).

In conclusion, assets refer to the valuable properties of the organization. For instance, for Johnson & Johnson assets include, cash, inventory, property and equipment as well as goodwill and tangible assets. Liabilities refer to the debts owed by the organization that may be long term or short term. In the case of Johnson & Johnson, the liabilities include long term debt and retained earnings. Cash flow refers to the financial statement which gives a clear picture on how the changes in balance sheet accounts as well as income statements affect the organization’s cash as well as cash equivalents. The cash flow activities are classified into, operating activities, investing activities as well as financing activities. From the financial trends of Johnson & Johnson as depicted from the income statements, it’s clear that Johnson & Johnson is in a good position in terms of finance and growth. The trends are also welcoming on the side of investors (Revelli, & Viviani, 2015).

References

Ahmed, A. M. (2018). THE IMPACT OF FINANCIAL STATEMENT ANALYSIS ON THE PROFITABILITY ASSESSMENT (APPLIED STUDY OF KIRKUK COMPANY FOR PRODUCING CONSTRUCTIONAL MATERIALS). STUDIES AND SCIENTIFIC RESEARCHES. ECONOMICS EDITION, (28).

Corbet, S., Lucey, B., Urquhart, A., & Yarovaya, L. (2019). Cryptocurrencies as a financial asset: A systematic analysis. International Review of Financial Analysis, 62, 182-199.

Dewachter, H., Iania, L., Lyrio, M., & de Sola Perea, M. (2015). A macro-financial analysis of the euro area sovereign bond market. Journal of Banking & Finance, 50, 308-325.

Jammaers, E., Zanoni, P., & Williams, J. (2019). Not all fish are equal: a Bourdieuan analysis of ableism in a financial services company. The International Journal of Human Resource Management, 1-26.

Post, C., & Byron, K. (2015). Women on boards and firm financial performance: A meta-analysis. Academy of Management Journal, 58(5), 1546-1571.

Revelli, C., & Viviani, J. L. (2015). Financial performance of socially responsible investing (SRI): what have we learned? A meta‐analysis. Business Ethics: A European Review, 24(2), 158-185.

Tan, L. (2017). Financial Situation Assessment of the Johnson & Johnson Company.

Vogel, H. L. (2016). Travel industry economics: a guide for financial analysis. Springer.

Vochozka, M., Rowland, Z., & Vrbka, J. (2016). Financial analysis of an average transport company in the Czech Republic. NAŠE MORE: znanstveno-stručni časopis za more i pomorstvo, 63(3 Special Issue), 227-236.

Net Income 2015 2016 2017 2018 15409 16540 1300 14297 Series 2 2015 2016 2017 2018 2.4 4.4000000000000004 1.8 2.8 Series 3 2015 2016 2017 2018 2 2 3 5

Net Income