Johnson and Johnson Annual Report

Annual Report Project

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1) Auditors’ Report:

a. Johnson & Johnson’s external auditor is PriceWaterHouse Cooper LLP.

b. Yes we do feel that Johnson & Johnson’s Auditors’ provide an unqualified (“clean”) opinion on the financial statements. It was clear on what the auditors’ were commenting on and the financials helped in supporting the comments.

2) Common-size financial statements:

(See attached sheets)

3) Liquidity Assessment:

The liquidity of the company is the ability of a company to pay its short-term obligations. Many companies with good long-run potential have been hurt by short-term liquidity problems. The current ratio is a common indicator of the overall liquidity of a company. The “rule of thumb” suggests that if it’s below 2.0, there is a problem. However, more modernly, companies’ current ratios are frequently less than 1.0.

Current Ratio= Current assets/Current liabilities

Quick Ratio= Cash+Marketable Securities+Receivables/Current liabilities

Johnson &Johnson’s Industry Current ratio= 1.51(MRQ) 1.82(MRQ)

Quick ration= 1.25(MRQ) 1.25(MRQ)

(MRQ)= most recent quarter.

Johnson & Johnson’s liquidity is good. They are well able to pay there short-term obligations. In comparison with the industry it’s almost average which is a good sign.

4) Long-Term Solvency:

The Leverage ratios are used to determine the long-term solvency of a company. The debt ratio is frequently used as an indicator of the overall ability of a company to repay its debts.

Debt ratio=Total liabilities/Total assets

Debt to equity ratio= Total Liabilities/ Total Equity

Johnson &Johnson’s Industry

Debt ratio= .44~ 44% .38~ 38%

Debt to equity ratio= .79~ 79% 22.02~222%

Johnson & Johnson’s is average based on the ratios. In comparison with the industry the company has a...