JONHSON AND JOHNSON FINANCIAL ANALYSIS
The enterprise has specialized in three healthcare sectors; consumer, pharmaceuticals and clinical devices. Executive summary Healthcare 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. It is the largest healthcare market globally and has recently been defined by key political policies such as universal care provision. The sector has its special features such as a fee for provider payment and Physicians exercise medication in a ramification of various organizational bureaucracy ranging from a solo practitioner working as a stand-by myself small enterprise to employment in a big doctor health center. The current recovery of the domestic economy from recess effect of the global financial crisis as well as recovery of the European Union presents good fortunes for the enterprise since these are its key two markets.
This took the form of trend analysis through ratios to show the general pattern of the ratios in comparison with those of rivals and sector benchmarks. Common size analysis was paramount in giving deep insights into key changes and trends highlighted and also give a fair comparison with competitors since the enterprises are of different sizes. The items are displayed in percentage form as well as in dollar from where each item is stated as a percentage of some total of which that item is part of. The enterprise is doing well with regard to profitability, constant dividend payment, asset management, and working capital management. Where it has its ratios above or equal to its peers and within the industry benchmark.
This ratio is paramount as these assets involve huge expenditures and should be employed effectively. This is more so for the manufacturing sector where Johnson is. An evaluation of trend analysis of the enterprise indicates a relatively stable ratio of between 0. 54 to 0. 49 between 2013-2017. The stock turnover ratio represents the number of tis inventory is sold in a year. A higher ration is preferred(Pandey, 2015). Johnson and Johnson have had a ratio of 2. 8 in 2013 to 2. 9 in 2017 implying that it turns its inventory around three times annually. This ratio is equal to that of its peer and slightly higher to the industry average of 0. This is a sign of high efficiency in main operations areas meaning the enterprise is in a position to meet its operational costs, fixed expenses, distributions to shareholders as well as depreciation while making net earnings to the enterprise.
Net profit margin has managed to increase from 0. 19 in 2013 to 0. 23 in 2016 before a sharp decline to 0. This is a decline in the liquidity position of the enterprise. Norvatis has had a ratio the ratio rise to 1. 4 in 2014 before a sharp decline to 0. 96 in 2015 before experiencing a slight stable increase up to 2017. Johnson and Johnson have better liquidity compared to its peer Norvatis. From the rule of thumb adopted from the previous explanation, the enterprise has its ratio within the industry benchmark. Long-term/ capital structure ratios These reveals an organizations’ ability to honor its longterm obligations as they mature. Chart 4 The debt-to-assets ratio, measures the amount of assets financed via debt. A high ratio is a sign f high leverage which exposes the enterprise to financial risk.
Johnson and Johnson have had an upsurge in the ratio from 0. A high ratio is preferred as it is a sign of high operating earnings. The firm has had an increase in its interest coverage ratio from 32 in 2013 to 39 in 2014 before a continuous decline to 19 in 2017. This means a reduction in the number of times interest charges can be met out of operating profit. An examination of its monetary statements reveals this is due to a decrease in operating earnings while interest charges have been on the increase. This is higher than that of its peer Norvatis of between 16 in 2013-12 in 2017. 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. The enterprise is faced with unlawful Importation of Pharmaceutical merchandise: The unlawful importation of pharmaceutical products from nations where authorities rate controls or different market dynamics bring about lower expenses continue to adversely affect the organization’s income and profitability in the U.
S. If the business enterprise fails to sufficiently differentiate and marketplace its logo name consumer products, this could adversely have an effect on revenues and profitability of these merchandises. Economic Climate and Outlook There are numerous growth opportunities for the industry ranging from high rate increase in population, rising middle class, favorable government policies towards healthcare and rising lifestyle and cancer disease. Rising population translates into an expanding market for the enterprise while an increase in middle class means people can afford to spend more on healthcare. Favorable policies like efforts to provide universal care by the state mean the population is in a position to afford medical care which the government pays for. Lastly, an increase in incidences of lifestyle diseases like diabetes and cancer presents an expended opportunity for growth in research to treat these diseases.
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 the 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 have been of great focus. Payers have grown to be a more potent force inside the marketplace and increased attention is being paid to drug and clinical device pricing, appropriate drug and scientific device usage and the quality and charges of health care commonly (Investor. The firm has a high liquidity from 2.
2 in 2013 to 2. 5 in 2016 before a sharp decline to 1. 4 in 2017. Nonetheless, this shows that its liabilities are well covered and their short-term creditors should not worry about the ability of the enterprise to honor its short-term liabilities when they fall due. 69 to $0. 70 from every dollar generated in sales; this implies it has managed its production costs well. Out of cost containment, the enterprise has managed to make good margins which have seen it maintain a constant dividend payout throughout apart from 2017 where profits had to be paid out of retained earnings due to increase in the provision of taxes which saw a sharp decline in net earnings. The management has done well in investments in fixed assets. The trend percent increase of the firm’s assets gives a deeper insight into the quality of its assets.
Management needs to improve on their operational efficiency; this can be achieved by reducing their collectibles period. They need also to try and put measures to turn inventory on more often to ensure higher sales that translate to more income. Another area of improvement is hedging strategies from the long time the enterprise has been in operation it should have familiarized with hedging strategies well. It is a sign of poor risk management to see the huge losses that the enterprise is making from foreign exchange rate exposure. It should make good use of both external hedging practices of derivatives like forwarding contracts, futures contracts, currency swaps, and options. L 1. 1 Inventory % 100 104 102 103 112 Norvatis Particular 2013 2014 2015 2016 2017 M M M M M Current Assets 30542 37561 22841 24931 28208 Current assets% 100 123 75 82 92 Current Liabilities 26318 26973 23708 22209 23402 Current Liabilities % 100 102 90 84 89 Inventory 7627 6093 6226 6255 6867 Current ratio= C.
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