MANAGERIAL Accounting Johnson & Johnson ’s 2009 financial statements include the

Question

MANAGERIAL Accounting

Johnson & Johnson ’s 2009 financial statements include the following items (all dollars in millions):

EXERCISE 14.15 Ratio Analysis for Feature Company E R LO6 F LO7 2009 2008 Balance sheet Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,541 $34,377 Current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,731 20,852 Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,682 84,912 Income statement Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $61,897 $63,747 Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,450 45,231 Net earnings (income). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,266 12,949 Campers, Industry Inc. Average Sales (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,000,000 100% Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,800,000 57 Gross profit on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,200,000 43% Operating expenses: Selling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,200,000 16% General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,400,000 20 Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,600,000 36% Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,600,000 7% Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000 3 Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,400,000 4% Return on assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23% 14% Compute the following ratios and comment on the trend you can observe from the limited two years of data you have available.

FIND

a. Gross profit rate

b. Net income as a percentage of sales

c. Current ratio

QUESTION PICTURED BELOW

L06 EXERCISE 14.15 Johnson & Johnson's 2009 financial statements include the following items (all dollars in millions): Ratio Analysis for Feature Company LO7 2009 2008 Balance sheet Current assets Current liabilities Total assets $39,541 $34,377 21,731 20,852 94,682 84,912 Income statement Sales Gross profit Net earnings (income) $61,897 $63,747 43,450 45,231 12,266 12,949 Compute the following ratios and comment on the trend you can observe from the limited two years of data you have available. a. Gross profit rate b. Net income as a percentage of sales c. Current ratio

Explanation / Answer

A.Gross Profit Rate= Gross profit/sales*100

In 2008=45231/63747*100=70.95

In 2009=43450/61897*100=70.20

B.net income as percentage of sale=net income/sales*100

In 2008=12949/63747*100=20.31%

In 2009=12266/61897*100=19.83%

C.current ratio=current asset/current liabilities

In2008=34377/20852=1.64:1

In 2009=39541/21731=1.82:1

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