Johson and Johson Financial Analysis

The executive of the parent company are tasked with development of strategic goals as well as resource allocations; however each subsidiary is responsible for its own running and strategic planning with borrowings from the holding company. The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices. The Consumer segment includes a broad range of products used in the baby care, oral care, beauty, over-the-counter pharmaceutical, women’s health and wound care markets. The Pharmaceutical segment is focused on six therapeutic areas: Immunology, Infectious Diseases and Vaccines (e. g. On the other hand players also face malpractice litigations. Special Sector Features Health care in the US is a very huge enterprise accounting for more than 17% of the gross domestic product as well as the biggest sole source of public expenditure.

Healthcare is special with respect to several elements: the most being that real decisions to use several clinical services are not dependent on the patient. When clinical approaches or prescription medicines are concerned, a physician must be involved to certainly prescribe or offer the remedy service. The health practitioner is within the function of both identifying what offerings a patient desires in addition to being paid for providing the ones offerings. Public applications like Medicare and Medicaid additionally do provide insurance Whilst the call for healthcare offerings is episodic, when services are needed they may be often needed right away. This requires many companies of services to keep consistent availability of take care of emergency needs. That regular availability of services can create demanding situations to preserving productiveness for providers of care in the course of times of slack demand.

Healthcare vendors function in a fee for-provider payment system, wherein they're paid based on the wide variety of offerings provided—essentially a bit-charge system. That creates a financial incentive to the issuer to provide as many services to the patient as can be fairly justified. This has seen ongoing efforts in discovery, testing and introduction of new items, enhancement of existing ones and undergoing efficacy and regulations compliance before being launched. The enterprise stays devoted to making an investment in research and development with the aim of delivering high great and innovative products. International costs of studies and development activities amounted to 10. 6 billion, 9. 1 billion and 9 billion for economic years 2017, 2016 and 2015, respectively. This is done through state bodies in collaboration with federal ones.

This trend is prevalent in all global marketplaces of operations. The result of this is increased testing coupled with documentation in order to get clearance for introduction of new items in the market translating to high expenses. Healthcare spending is and will always be of interest to the state with respect to study, inquiries as well as regulations by government and federal bodies globally. Domestically pricing, earnings and practitioners prescriptions has been of great focus. 5 in 2016 before a sharp decline to 1. 4 in 2017. This is attributable to a sharp decline in current assets 76% in 2017 followed by a 119% increase in current liabilities the same year. This is a decline in the liquidity position of the enterprise. Norvatis has had a ratio the ratio rise to 1.

9 in 2016 this is due to decrease in current assets more than decrease in current liabilities. Johnson and Johnson has a higher ratio than its peer Norvatis. Given the illiquid nature of inventory this shows it constitutes little of the current assets of the enterprise and thus indicates its ability to meet current obligations from its most liquid assets. From the rule of thumb adopted from the previous explanation the enterprise has its ratio within the industry benchmark. Capital Structure and Longterm Solvency Ratios Long term solvency ratios; they reveal an organization potential to honor its monetary responsibilities or extra typically volume that an organization has borrowed fixed rate capital to finance its purchase of assets or resources of the enterprise. The ratio is relatively low below 1which is the industry standard meaning that the enterprise is lowly leveraged and thus low financial risk.

Interest coverage ratio also referred to as times interest earned ratio. Reveals the number of times interest charges can be paid out of operating profit. The higher the ratio the better as it shows an enterprise has high operating profits or low interest charges. If it is due to the latter it reveals an enterprise has low interest charges or debt capital. This ratio is higher than that of its peer of 0. 46 in 2013 to 0. 37 in 2017. This is an indication that it is generating more sales than its peer. The ratio implies number of times the stock was sold in a year i. This shows the enterprise has managed to make between $0. 69 to $0. 70 from every dollar generated in sales; this implies it has managed its production costs well.

This ratio is equal to that of its peer and slightly higher to industry average of 0. Net profit margin has managed to increase from 0. This shows a positive signal for the firm and executive policy of a high dividend despite low earnings in 2017. This is higher than that of its peer Noratis of between 2. 45 to 2. 90 The firm marketplace price has been on a rise from 92. 35 in 2013 to 139. This is supported by the fact that the enterprise has had high earnings than its peers and as a result outpaced its rivals in terms of dividend distributions. In addition the share price has been on steady rise showing a continuous sign of capital gain. This is coupled by the fact the share price is still attractive to the market due to its moderate price which is affordable.

Credit Assessment The firm is attractive for credit facilities from its suppliers as well as lenders. The firm has a high liquidity from 2. There is high reliance on short term credit especially certificate of deposit this should change The risk of malpractice creates incentives for physicians and hospitals up to cover up their mistakes instead of accepting and working proactively to avoid them in future. Malpractice standards need to be addressed where complains result out of terrible clinical practices like negligence and use of outdated remedies not while a patient had a horrific final results notwithstanding receiving suitable treatment. With better data and no restrictions on preference, many court cases could be prevented. Appendices Table 1 Short term Liquidity J& J Particular 2013 2014 2015 2016 2017 Current Assets 56407 59311 60210 65032 43088 Current assets % 100 105 107 115 76 Current Liabilities 25675 25085 27747 26287 30537 Current Liabilities % 100 98 108 102 119 Inventory 7878 8184 8053 8144 8765 Current ratio= C.

A/C. 9 Inventory % 100 80 82 82 90 Table 2 Long term solvency J&J Particular 2013 2014 2015 2016 2017 Total assets 131754 130358 133411 141208 157303 Shareholders equity 74053 69752 71150 70418 60160 Total liabilities 58360 61367 62261 70790 97143 Total liabilities % 100 105 107 121 166 Debt to equity ratio= total assets/ shareholders equity 1. 6 Debt to asset ratio=total liabilities/total assets 0. 62 Total assets % 100 99 101 108 119 Norvatis Particular 2013 2014 2015 2016 2017 Total assets 126254 125387 131556 130134 133079 Shareholders equity 74472 77182 74832 70418 74168 Total liabilities 51782 54543 64434 66233 58852 Total liabilities % 100 105 124 128 114 Debt to equity ratio N 1. 3 Debt to asset ratio N 0. 44 Total assets % 100 99 104 103 105 J & J Particular 2013 2014 2015 2016 2017 EBIT 15471 20563 19196 19803 17673 Interest expense 482 533 552 726 934 Interest coverage ratio=EBIT/Interest expense 32 39 35 27 19 Norvatis Particular 2013 2014 2015 2016 2017 EBIT 10735 12272 8134 7917 8999 Interest expense 683 655 704 707 777 Interest coverage ratio-N 16 19 12 11 12 Table 3 Profitability J & J Particular 2013 2014 2015 2016 2017 Gross profit 48970 51585 48538 50205 51096 Sales 71312 74331 70074 71890 76450 C. 01 Sales % 100 104 98 100 107 Norvatis Particular 2013 2014 2015 2016 2017 Net profit margin 9202 10280 17794 6698 Net profit margin% 100 111 193 72 Sales 57920 52419 49440 48618 Net profit margin-N 0. 01 Sales % 100 91 85 84 Table 4 Market measures J&J Particular 2013 2014 2015 2016 2017 Dividend = dividend paid/no. of ordinary shares 2. 32 Market price per share 92. 72 Earnings per share Norvatis Particular 2013 2014 2015 2016 2017 Dividend -N 2.