Question

The following are the simplified financial statements for Johnson and Johnson, please use them to answer...

The following are the simplified financial statements for Johnson and Johnson, please use them to answer the next 12 questions. All amounts are in millions.

2019
Sales 82,059
Cost of products sold 27,556
Gross Profit 54,503
Selling, marketing and administrative expenses 22,178
Research and development expense 12,245
Other expense 2,486
Restructuring 266
Operating Income before taxes $ 17,328
Income Tax Expense 2,209
Net Income 15,119
2019 2018
Assets
Current assets
Cash and cash equivalents (Notes 1 and 2) $              17,305 18,107
Marketable securities (Notes 1 and 2) 1,982 1,580
Accounts receivable less allowances $226 (2018, $248) 14,481 14,098
Inventories (Notes 1 and 3) 9,020 8,599
Prepaid expenses and other receivables 2,486 3,649
Total current assets 45,274 46,033
Property, plant and equipment, net (Notes 1 and 4) 17,658 17,035
Intangible assets, net (Notes 1 and 5) 47,643 47,611
Goodwill (Notes 1 and 5) 33,639 30,453
Other assets 13,514 11,822
Total assets $           157,728 152,954
Liabilities and Shareholders’ Equity
Current liabilities
Loans and notes payable (Note 7) $                1,202 2,796
Accounts payable 8,544 7,537
Accrued liabilities 9,715 7,601
Accrued rebates, returns and promotions 10,883 9,380
Accrued compensation and employee related obligations 3,354 3,098
Accrued taxes on income (Note 8) 2,266 818
Total current liabilities 35,964 31,230
Long-term debt (Note 7) 26,494 27,684
Employee related obligations (Notes 9 and 10) 10,663 9,951
Long-term taxes payable (Note 8) 13,402 15,748
Other liabilities 11,734 8,589
Total liabilities 98,257 93,202
Commitments and Contingencies (Note 21)
Shareholders’ equity
Capital Stock 3,120 3,120
Retained earnings 56,351 56,632
Total shareholders’ equity 59,471 59,752
Total liabilities and shareholders’ equity $           157,728 152,954

1.To examine Johnson and Johnson's liquidity, the calculation of the days sales in inventory for 2019 would be closest to (round to one decimal place and label your answer):

2. To examine Johnson and Johnson's liquidity, the calculation of the accounts receivable turnover for 2019 would be closest to (round to one decimal place and label your answer):

3. To examine Johnson and Johnson's profitability, the calculation of the gross profit margin for 2019 would be closest to (round to one decimal place and label your answer):

4. To examine Johnson and Johnson's profitability, the calculation of the return on assets/investment for 2019 would be closest to (round to one decimal place):

5. To examine Johnson and Johnson's liquidity, the calculation of the current ratio for 2019 would be closest to (round to one decimal place):

6. Given the financial statements and ratios for Johnson and Johnson at the end of 2019 as given above. If the following transaction was added to the 2019 financial statements at the end of 2019, consider the impact on the indicated ratio. Johnson and Johnson purchased a building for 5,000 (in millions) by borrowing all of the amount from the bank. The return on assets/investment would:

7. Given the financial statements and ratios for Johnson and Johnson at the end of 2019 as given above. If the following transaction was added to the 2019 financial statements at the end of 2019, consider the impact on the indicated ratio. Johnson and Johnson purchased a building for 500 (in millions) by borrowing all of the amount from the bank. The profit margin would:

8. Given the financial statements and ratios for Johnson and Johnson at the end of 2019 as given above. If the following transaction was added to the 2019 financial statements at the end of 2019, consider the impact on the indicated ratio. Johnson and Johnson purchased 10,000 (in millions) of inventory on credit. The current ratio would:

9. At the end of 2019, what was the total that was owed to Johnson and Johnson by customers for the purchase of Johnson's products on credit (in millions)?

10.At the end of 2019, what was the amount that Johnson and Johnson estimated would not be received from customers for the purchase of Johnson's products on credit (in millions)?

11. To examine Johnson and Johnson's profitability, the calculation of the profit margin for 2019 would be closest to (round to one decimal place and label your answer):

12. Given the financial statements and ratios for Johnson and Johnson at the end of 2019 as given above. If the following transaction was added to the 2019 financial statements at the end of 2019, consider the impact on the indicated ratio. Johnson and Johnson sold inventory that cost 200 (in millions) for $600 to customers on credit. The quick ratio would:

Homework Answers

Answer #1

Answer of question No.1 :-

Days Sales in Inventors = (Closing balance of Inventory/Cost of Goods Sold)*365

= (9020/27,556)*365

= 119.5 Days

Answer of Question No.2 :-

Accounts receivable turnover = Net Credit Sales/Accounts receivables

=(Sales-Cash and Cash equivalent)/Accounts receivables

= 64,754/14,481 = 4.5

Answer of Question No.3:-

Gross Profit Margin = (Total revenue - COGS)/Total Revenue

= (82,059-27,556)/82,059*100 = 0.66

Answer of Question No.4 :-

Accounts receivable turnover = Net Credit Sales/Accounts receivables

= 64,754/14,481 = 4.5

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