Question 5. 5. (TCO F) Please review the following real-world ratios for Johnson
ID: 2501690 • Letter: Q
Question
Question 5. 5. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.5. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.
Ratio Name
Johnson & Johnson
Pfizer
Profit margin
16.1%
24.7%
Inventory turnover ratio
3.1
1.7
Average collection period
59.4 days
69.1 days
Cash debt coverage ratio
.27
.16
Debt to Total assets
46.6%
127.5%
Required: 1: Please explain the meaning of each of the Pfizer ratios above. 2: Please state which company performed better for each
Ratio Name
Johnson & Johnson
Pfizer
Profit margin
16.1%
24.7%
Inventory turnover ratio
3.1
1.7
Average collection period
59.4 days
69.1 days
Cash debt coverage ratio
.27
.16
Debt to Total assets
46.6%
127.5%
Explanation / Answer
1. Profit margin ratio = it is a profit as a percentage of sale. It is higher the better
Inventory turnover ratio = It shows how many times inventory is sold and replaced over a period. It is higher the better.
Average collection period = It shows how much time debtors takes to release payments. Higher priod will effect working capital. It is lower the better
cas debt coverage ratio = It measure the relationship between cash provided by operating activities and current liabilities.It is higher the better.
Debt to total asset = It shows the amount of total debt to the total assets. It is lower the better
2. By analyzing the ratios given in the question and having regard to the discussion made in point 1. it can be said that johnson & johnson performsbetter.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.