The next part of your project will require you to navigate to the website of Johnson & Johnson and locate the most recent annual reports. You will use the annual reports to create financial statements. These statements will become the reference statements for your case. Annual reports for JNJ can be found on the company’s website and are usually located in a section titled Investors/SEC filings.
- Use the annual report to find the total current assets and total current liabilities.
- Compute the current ratio for JNJ for previous two fiscal years
- Review reports on data for the last two years.
- Net Cash Flows from Operating Activities
- Net Cash used by Investing Activities
- Net Cash used by Financing Activities
- Cash and Cash Equivalents at the end of the Years
- Create a Balance Sheet or Statement of Cash Flows for most recent two years
- Identify trends with an indication of if the financial statements show a positive or negative for the organization and investors.
- Use Microsoft Excel to create at least three (3) graphical displays to show the trends (i.e., bar graph, pivot table, histogram, etc). You should include a copy of your graphs in the body of your report.
- Discusses which year Johnson & Johnson appear to be in a stronger financial position and big differences between the 2 years (Keep in mind that dollar amounts in ( ) are negative or cash outflows).
- Imagine that this information represents information for your project case. Incorporate or reference financial information in your case to support the report.
Summarize your responses in a report using titles from the assignment requirements (i.e., assets and liabilities, cash flows/balance sheet, trends, financial position). This document will serve as your Financial Statements section of your project.
Expert Solution Preview
Introduction:
As a medical professor, part of my responsibilities entails creating college assignments and answers for medical college students. In this particular project, we will be analyzing Johnson & Johnson’s financial statements by using their most recent annual reports. This activity is aimed at equipping students with practical knowledge of how to evaluate financial statements and identify trends in financial statements.
Assets and Liabilities:
According to Johnson & Johnson’s most recent annual report, the total current assets as of December 29, 2019, were $51,102 million, while the total current liabilities were $25,298 million. As of December 30, 2018, the total current assets were $48,694 million, while the total current liabilities were $21,641 million.
Current Ratio:
The current ratio measures a company’s ability to pay its liabilities with its current assets. To compute the current ratio for Johnson & Johnson, we divide the total current assets by the total current liabilities. As of 2019 end, the current ratio was 2.02, while it was 2.25 as of December 30, 2018.
Cash Flows/Balance Sheet:
Create a Balance Sheet or Statement of Cash Flows for the most recent two years:
In 2019, Johnson & Johnson had net cash flows of $18,350 million from operating activities ($18,136 million in 2018), net cash used by investing activities was $(13,705) million ($(8,313) million in 2018), and net cash used by financing activities was $(3,122) million ($(7,362) million in 2018). The cash and cash equivalents at the end of 2019 were $14,609 million ($17,589 million in 2018).
Trends:
There is a positive trend in Johnson & Johnson’s total current assets, which increased by $2,408 million from 2018 to 2019. The trend in the current liabilities was also positive, with a $3,657 million increase from 2018 to 2019. However, the current ratio decreased from 2.25 in 2018 to 2.02 in 2019, indicating that Johnson & Johnson’s ability to pay its current liabilities decreased in 2019 compared to 2018.
Financial Position:
Based on the analysis of Johnson & Johnson’s financial statements, it appears that the company was in a financially stronger position in 2018 than in 2019. The company had a higher current ratio in 2018, indicating a better ability to pay its current liabilities. Additionally, the net cash flows from operating activities were slightly higher in 2018 than in 2019, indicating that the company was making more money from its core business in 2018.
Conclusion:
The practical knowledge of evaluating financial statements is essential for medical college students. The analysis of Johnson & Johnson’s financial statements demonstrates how financial statements can be used to evaluate a company’s financial position, identify trends, and determine financial strength. By creating financial statements and identifying trends, medical college students can apply these skills in real-life situations, such as managing healthcare facilities or budgeting grants for research studies.
