FINANCIAL ANALYSIS

Introduction

Warren Buffet is one of the renowned personalities in finance as he is one of the wisest decision makers amongst every kind of financial decision. He through his wisdom and expertise in the field of finance has laid down six key criteria so to check any company's stability before investing in it. These six key criteria are long term potential, low debt structure, retained earnings vs. dividend payout, getting influenced through current fads or latest trends, greater return on equity and steady earnings and high profit margins. A company has to be firm enough so to meet these requirements and give a better return.

Discussion

In this paper I have selected to bring an investment analysis on the company Johnson & Johnson (JNJ) listed on New York Stock Exchange (NYSE). It is a holding company that deals in three business segments: Pharmaceutical, which includes products in areas such as dermatology, immunology, antipsychotic, neurology and anti-infective; Medical Devices and Diagnostics which includes a range of products distributed to hospitals, retailers and wholesalers; and Consumer, which includes a product range used in skin care, wound care, oral care, baby care and women's health fields among others. All the segments in which Johnson & Johnson deals has a strong future and they are considered to be well doing businesses in future periods.

The price earnings ratio may be calculated as:

Price earnings ratio (P/E) = Market value per share / Earnings per share

Price earnings ratio (P/E)=21.8762

The ratio shows the earnings capacity of the company, the company has a better standing in the stock market that for every one dollar of earning, investors are ready to pay $21.8762.

Total Debt to Total Assets ratio=Total debt / Total assets

=$56,564 million / $113,644 million

=0.4977

Total debt to Total Assets ratio shows every $1 of asset is backed by $0.4977 of debt.

Dividend yield ratio =Dividend per share / Market Value per share

Dividend yield ratio=3.50%

The ratio describes the relation between the market value per share and the dividend per share. This ratio shows that $1 invested in the market for a share in the company yield 3.5% of the company's earnings as dividends.

Johnson & Johnson is a company that deals in the variety of product range and is one the leading companies in the industry. The future of this company looks very much strong and it is better to invest in this company as its financials reveal a better image for it ...