Lauren Gear Christopher Fountain Ryan Stelly Johnson & Jonson Financial Statement Project Company Questions: Type

answers to the following questions regarding your company. You will need to use the financial statements and notes to the financial statements (use most recent annual report notes). 1. Does the company use the calendar year or a fiscal year? If a fiscal year is used, what is the rule for determining the annual year-end. Johnson & Johnson (J&J) uses a fiscal year. Their By-Laws state: The fiscal year of the Corporation shall end on the Sunday closest to the end of the calendar month of December and shall begin on the Monday following that Sunday. 2. What type of stock does the company have outstanding (common, preferred, or both)? How many shares are authorized, issued, and outstanding? What is the par value? The company has Common Stock and Preferred Stock outstanding. They have 4,320,000,000 shares of common stock authorized and 3,119,843,000 shares issued as of December 30, 2012. They also have 2,000,000 shares of preferred stock authorized and unissued as of December 30, 2012. 3. Does the company have any extraordinary items or discontinued operations on the income statement that we learned about in chapter 4? If so, describe. They do not. 4. We learned in chapter 4 that companys can disclose comprehensive income in one of two methods. Which one does the company use? Johnson & Johnson discloses comprehensive income in a separate Statement of Comprehensive Income. 5. Review the note that describes the Significant Accounting Policies (usually note 1). What are some of the methods used? Examples: When is revenue recognized, what depreciation method is used, what inventory cost flow method is used, etc. J&J utilizes the straight-line method of depreciation. The company recognizes revenue from product sales when the goods are shipped or delivered and title and risk of loss pass to the customer. Inventories are stated at the lower of cost or market determined by the first-in, firstout method. Research and Development expenses are expensed as incurred.

6. Review the balance sheet. List any line items that you are unfamiliar with. Accrued rebates, returns and promotions Accrued compensation and employee related obligations Employee related obligations 7. Review the income statement. List any line items that you are unfamiliar with. In-process research and development Restructuring Net loss attributable to noncontrolling interest 8. Review the income statements and balance sheets. Before doing the ratio analysis, in your opinion does it appear that the company is in good financial condition? What trends can you identify? When looking at the income statement, it appears that both their sales and expenses have been increasing at a relatively equal rate for the past three years, meaning the company will most likely not have to worry about potential problems in efficiency. The balance sheet shows receivables have increased over the past few years which usually is not a good sign considering that receivables include a risk of customers not paying. However, due to the relatively small increase of this number (16.3% of sales in 2011 to 16.8% in 2012) it does not seem to be something to worry about too much. Also when looking at the balance sheet, it is important to consider where the company stands in relation to overall debt. Their short-term debt does not appear to be a problem at all, considering they have more than enough in current assets to cover the amount due. As far as long-term debt is concerned, J&J had $11.5 billion dollars at the end of 2012, which was less than the previous year. In doing some further analysis, we found that Johnson & Johnsons payback ratio for long term debt is .83 years. This is ideal for J&J because it shows they can pay off their longterm debt with less than one years worth of earnings. Overall, the company appears to be on the positive trend and we believe it will continue to show growth in the coming years.