FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis - J&J and P&G

Introduction

Financial Analysis offers investors, shareholders and other stakeholder's guidance towards investment decision in the company. It assesses the performance of the company considering the industry and sectors in which they operate. Due to current situation of the economy, companies have reconsidered their lifestyle. Typically, the main causes of adjustment can be either low efficiency or high value of the financial aspects. In this paper, we will focus on Johnson & Johnson and Procter and Gamble financial analysis in order to make an investment decision (Koen, Oberholster, 2012, p. 3).

Overview of the Company - Johnsons & Johnson

Johnsons & Johnson is an American Publicly traded company that has been serving entire world since 1886. Johnsons & Johnson has been involved in manufacturing medical devices, pharmaceuticals products, personal care products, perfumes and baby products. Company was established by joined brothers James Wood Johnson and Edward Mead Johnson in order to develop a line of ready to use surgical dressings. Johnsons & Johnson has been operating in more than 57 countries and has more than 230 subsidiaries. Johnsons & Johnson products are available in 175 countries and due to this, their brand has been recognized in almost in the entire world (Johnson & Johnson website).

Overview of the Company - Procter & Gamble

Procter & Gamble widely known as P&G is also an American company that has been involved in delivering consumer goods in most region of the world. Hence, it is one of the largest American multinational companies in terms of market capitalization. Procter & Gamble has been operating in more than 160 countries and has more than 300 brands which are used on daily basis. Amount them the most famous are Gillette, Duracell, Ariel, Tampax etc (Procter & Gamble website).

Financial Analysis of J&J and P&G

In order to analyze the financial data of J&J and P&G we will calculate different ratios from the financial statements of the companies and their comparison with the previous trend. This will help to do the assessment of the stability, viability and profitability of the Johnson & Johnsons and Procter & Gamble (Koen, Oberholster, 2012, p.12).

Financial Ratios

Financial ratios of &J and P&G are calculated on the basis of financial reporting of the company. Sources include: Balance sheet, Profit and Loss (Income statement), statement of retained earnings (Statement of retained earnings), Report of Cash Flows (Cash flow statement) (Tracy, 2012, p.10).

Profitability Ratios

The purpose of profitability ratios is to identify an ability of the company to generate sufficient income and revenue. Beside this, it is basically ability of company to produce profit relative to their available resources and investors funds i.e. sales, assets and equity. This evaluation was done in three basic levels (Peterson, Fabozzi, 2012, p. n.d):

Sales

Assets (ROS - Return on assets)

Equity (ROE - return on equity)

Source: Annual report 2012

Johnson & Johnson (NYS: JNJ)

Procter & Gamble Co. (NYS: PG)

Profitability Ratios

2011

2012

ROA % (Net)

13.53

9.26

ROA % (Net)

8.85

7.93

ROE % (Net)

24.95

17.85

ROE % (Net)

18.32

16.37

Gross Profit Margin %

32.87

26.61

Gross Profit Margin ...