Johnson & Johnson
INTRODUCTION Johnson & Johnson (J&J) was founded in the late 1800s in New Brunswick, New Jersey, by Robert Wood Johnson I and his brothers, James Wood Johnson, and Edward Mead Johnson. When it first began, J&J produced consumer healthcare products including first-aid kits, baby powder, dental floss, etc. (Johnson & Johnson History, n.d.). Overtime, however, J&J has grown tremendously and now operates three different business segments: consumer, medical devices and diagnostics, and pharmaceuticals. Additionally, J&J is made up of more than 250 companies located in 57 different countries around the world (“Company Structure”, n.d.). As of 2012, J&J was ranked 42nd on the Fortune 500 ("Fortune 500 2012: Fortune 1000 Companies 1-100," 2012), was a component of the Dow Jones Industrial Average (DJIA) (DIJA, n.d.), and was traded on the New York Stock Exchange (NYSE) under the ticker symbol “JNJ” (NYSE Euronext, n.d.).
RATIO ANALYSIS
(The following figures have been calculated using figures listed in J&J’s Form 10-K included in the 2012 Annual Report. Calculations of each ratio can be seen in the Appendix.) The first ratio considered focuses on J&J 's "liquidity." According to Ross, Westerfield, and Jordan, "Liquidity refers to the speed and ease with which an asset can be converted to cash" (2012, p. 23). The liquidity ratio being considered in this case, is the current ratio (current assets divided by current liabilities), which measures J&J 's short-term debt paying ability. Based on the figures in the balance sheet from 2012, the current ratio was 1.90, meaning that the company had $1.90 worth of current assets for every $1.00 of current liabilities. J&J 's current ratio exceeds the industry average of 1.62 ("Johnson & Johnson (JNJ)," n.d.). Though a higher current ratio is typically desirable (especially for creditors), a high current ratio could also indicate an inefficient use of cash and short-term assets. The next set of ratios considered
RATIO ANALYSIS
(The following figures have been calculated using figures listed in J&J’s Form 10-K included in the 2012 Annual Report. Calculations of each ratio can be seen in the Appendix.) The first ratio considered focuses on J&J 's "liquidity." According to Ross, Westerfield, and Jordan, "Liquidity refers to the speed and ease with which an asset can be converted to cash" (2012, p. 23). The liquidity ratio being considered in this case, is the current ratio (current assets divided by current liabilities), which measures J&J 's short-term debt paying ability. Based on the figures in the balance sheet from 2012, the current ratio was 1.90, meaning that the company had $1.90 worth of current assets for every $1.00 of current liabilities. J&J 's current ratio exceeds the industry average of 1.62 ("Johnson & Johnson (JNJ)," n.d.). Though a higher current ratio is typically desirable (especially for creditors), a high current ratio could also indicate an inefficient use of cash and short-term assets. The next set of ratios considered
Cited: Company Structure. (n.d.). - Johnson & Johnson. Retrieved April 25, 2013, from http://www.jnj.com/connect/about-jnj/company-structure/ DJIA Gorsky, A. (2013, March 13). Chairman 's Letter. Annual Report 2012. Retrieved April 29, 2013, from http://www.2012annualreport.jnj.com/chairmans-letter Fortune 500 2012: Fortune 1000 Companies 1-100 "JNJ: Summary for Johnson & Johnson Common Stock- Yahoo! Finance." Yahoo! Finance. N.p., n.d. Web. 25 Nov. 2013. . "Johnson & Johnson (JNJ)." Stock Analysis on Net. N.p., n.d. Web. 26 Oct. 2013. . "Johnson & Johnson - Investor Relations - Dividend History for Ticker JNJ." Johnson & Johnson - Investor Relations - Dividend History for Ticker JNJ. N.p., n.d. Web. 30 Nov. 2013. . "Registered Users." Standard & Poor 's. N.p., n.d. Web. 26 Oct. 2013. . Ross, S. A., Westerfield, R., & Jordan, B. D. (2012). Fundamentals of corporate finance. New York, NY: McGraw-Hill/Irwin.