Current ratio is defined as “liquidity ratios that tell you about a company’s ability to meet all its financial obligations, including debt, payroll, payments to vendors, taxes, and so on.” (www.business-literacy.com/financial-concepts/current-ratio/). To calculate JNJ’s current ratio, we computed by dividing current asset by current liabilities, which gave us the current ratio of 1.47 for the quarter that ended in December 2018. As for 2017, the current ratio was 1.41. “During the past 13 years, JNJ’s highest Current Ratio was 2.48. The lowest was 1.20. And the median was 1.82.” (www.gurufocus.com/term/current_ratio/NYSE:JNJ/Current-Ratio/Johnson–Johnson). Base on these stats, it appears they are not doing bad or great.
The statements of cash flows of JNJ shows the Net Cash Flows from Operating Activities to be $22,201,000 in 2018 and $21,056 in 2017. The total Net Cash used by Investing Activities was (3,167,000) in 2018 and (14,868,000) in 2017. The Net Cash used by Financing Activities was reported to have been (18,510,000) in 2018 and (7,673,000) in 2017. The case and case equivalents at the end of the years for 2018 was $18,107,000 and $17,824,000 for 2017.
Attached is the balance sheet for the most recent two years, in which it includes assets, liabilities and shareholders’s equity. With the breakdown of these areas, the balance sheet gives a good glimpse of the company’s financial position along with what the company owns and owes (Investopia Staff, February 8, 2019, www.investopedia.com/articles/04/031004.asp).
The common size balance graph shows JNJ financial statement trends to neither be positive or negative for the organization. The changes appears to be steady. We are only looking at assets, “this tpe of balance sheet analysis can be used to check out the company’s liabilities as well” (Begin To Invest, April 08, 2019). Instead of looking at numbers in millions or billions, we can look at it from the percentage perspective to see the percentage of short-term debt or the increase in goodwill and decrease in cash.
After reviewing Johnson and Johnson balance sheet along with the above chart, in 2018 JNJ appear to be in a stronger financial position than 2017, but not by much. Overall there is not a huge difference between 2017 and 2017. Whereas to in the case of Academic Medical Center, going from losing $70 million in one year to making $39 million the following year would have shown a huge difference between the two years.
1. Annual Report 2018 Johnson & Johnson, http://www.investor.jnj.com/annual-meeting-materials/2018-annual-report
2. Johnson & Johnson (NYSE: JNJ) Current Ratio: 1.47 (As of Dec. 2018) https://www.gurufocus.com/term/current_ratio/NYSE:JNJ/Current-Ratio/Johnson–Johnson
3. Current Ratio, http://www.business-literacy.com/financial-concepts/current-ratio/
4. Investopia Staff, February 8, 2019, www.investopedia.com/articles/04/031004.asp
5. Begin to Invest, April 8, 2019, https://www.begintoinvest.com/common-size-analysis-different-way-analyze-balance-sheet-financial-statements/
Johnson and Johnson Common Size Balance Sheet – Analysis of Total Assets
2018 Cash and cash equivalents Marketable securities Accounts receivable Inventory Prepaid expenses and other receivables Assets held for sale Total current assets Property, plant and equipment, net (Less accumulated depreciation) Intangible assets, net Goodwill Deferred taxes on income Other assets Total noncurrent assets 0.11838199720177309 1.0329903108124011E-2 9.2171502543248296E-2 5.6219516978960993E-2 1.7645828157485256E-2 6.2110176915935508E-3 0.30095976568118521 0.11137335408031172 0 0.31127659296259008 0.19909907553905096 4.9949658067131295E-2 2.7341553669730768E-2 0.69904023431881479 2017 Cash and cash equivalents Marketable securities Accounts receivable Inventory Prepaid expenses and other receivables Assets held for sale Total current assets Property, plant and equipment, net (Less accumulated depreciation) Intangible assets, net Goodwill Deferred taxes on income Other assets Total noncurrent assets 0.11330998137352752 3.0005785013636102E-3 8.5758059286854038E-2 5.5720488484008568E-2 1.6128109444829404E-2 0 0.27391721709058314 0.10810346910103431 0 0.33837879760716577 0.2028314781027698 4.5167606466500955E-2 3.1601431631945988E-2 0.72608278290941686