FIN 320 7-1 Project Two Comparison Analysis- Roleshia Bickham

docx

School

Southern New Hampshire University *

*We aren’t endorsed by this school

Course

320

Subject

Finance

Date

Apr 3, 2024

Type

docx

Pages

Uploaded by Paris_Mya_Nyla_Mom

Roleshia Bickham Southern New Hampshire University FIN-320 5-2 Project Two: Comparison Analysis Alex Merrill August 12, 2023

In this project, we were to calculate the financial ratios to determine the current financial health of my chosen company. The company that I chose is Johnson & Johnson. Using the online tool, Mergent Online, which provided the financial statements (income statement, balance sheet, and cash flow statement) for the end of the 1 st quarter of 2023, I have provided my results and findings below. Accounting and Financial Ratios Most Recent (Quarter 1) April 2, 2023 Prior Year (Quarter 1) April 3, 2022 Current Ratio 1.066503238 1.392578935 Working Capital 4,015,000 17,034,000 Debt Ratio 0.638366272 0.58112192 Earnings Per Share (0.026098637) 1.958390385 Price Earnings Ratio (59.39007466) 90.49778908 Total Asset Turnover Ratio 0.126275074 0.13134479 Financial Leverage 2.765228802 2.387329505 Net Profit Margin (0.002747919) 0.219798514 Return On Assets (0.000346994) 0.02886939 Return On Equity (0.042472731) 0.031616003 “Ratio analysis is a quantitative method of gaining insight into a company’s liquidity, operational efficiency, and profitability by studying its financial statements such as the balance sheet and income statement (Bloomenthal, 2023). Accounting ratios are a group of metrics used to measure the efficiency and profitability of a company based on its financial reports” (Hayes, 2020). These are often used by investors and financial analysts to determine the health of the

company. Based on the results from the analysis completed for Johnson & Johnson and the comparison of the 1 st quarter of 2023 compared to the 1 st Quarter of 2022, Johnson & Johnson has a significant loss this quarter but based on the working capital, it is still borderline financially healthy. Over the last year, Johnson & Johnson’s working capital has had a significant decrease of $4,015,000 compared to its 2022 figure of $17,034,000. This is a difference of $13,019,000. This is largely due to the company’s current liability showing an increase of $60,373,000 compared to last year’s amount of $43,390,000, which is a difference of $16,983,000 and the net income being negative this quarter. There was a net loss of $(68,000) compared to a financial gain in 2022 of $5,149,000. So, based on the current ratio, 1.0665, the company is not considered to be in financial strain because it is still over 1%. A good working capital ratio would be between 1.2 and 2.0. The return on equity is low for both 2022 and 2023. The return on equity is in the negative for 2023. It should average between 15% to 20%. Johnson & Johnson has acquired a significant amount of debt this quarter compared to last year. Loans and notes payable, accrued taxes on income, debentures, long-term and other long-term debt are a factor in the increase of liabilities this quarter compared to the 1 st quarter of 2022. I wouldn’t say that the company’s financial health is failing based on the findings, but I will say that it is strained based on the financial data this quarter. “Short-term financing is a financing option with a repayment term of one year or less and is utilized by companies to access the cash necessary to cover emergency expenses, fill gaps in cash flow, buy inventory, or take advantage of business opportunities” (Treece, 2023). All things considered, there isn’t a need for a short-term business loan at this time. The current cash flow statement shows that the company is still profitable and not in the negative.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Reference Bloomenthal, A. (2023). Financial Ratio Analysis: Definition, types, examples, and how to use. Investopedia . https://www.investopedia.com/terms/r/ratioanalysis.asp Hayes, A. (2020). Accounting Ratio Definition and Different Types. Investopedia . https://www.investopedia.com/terms/a/accounting-ratio.asp Mergent. (n.d.). Johnson & Johnson (NYS: JNJ) [Company profile]. Retrieved July 30, 2023, from https://www.mergentonline.com/login.php Return on equity ratio (ROE). (2023, March 24). BDC.ca . https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/financial-tools/return-on- shareholders-equity#:~:text=While%20average%20ratios%2C%20as%20well,ratio %20would%20be%20considered%20low . Treece, K. (2023, July 5). Best Short-Term Business Loans Of 2023 . Forbes Advisor. https://www.forbes.com/advisor/business-loans/best-short-term-business-loans/ #:~:text=Short%2Dterm%20business%20loans%20are,take%20advantage%20of %20business%20opportunities . Yahoo is part of the Yahoo family of brands . (n.d.). https://finance.yahoo.com/quote/JNJ/history? period1=1646092800&period2=1690675200&interval=1d&filter=history&frequency=1d &includeAdjustedClose=true