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:
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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