Johnson & Johnson Ratios the Research Proposal

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Johnson & Johnson has maintained strong financial performance over the past five years. They generally operate around or better than the industry average on most key ratios. They've been able to maintain steady margins and sales growth over the past five years and have attained steady growth in line with the industry. Operating, pre-tax and net margins have all been consistently higher than those of comparable firms.

JNJ has maintained strong profitability over the time span. They have retained a steady gross margin over the past five years, which at 71.49% average is higher than the industry average and double that of the S&P. The gross profit has remained in a tight range between 70.9% and 72.26%. Given the strong improvements in sales, the broad range of companies within the group, and the acquisitions in recent years, this consistency is admirable.

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The result has been a consistent outperformance vs. their peers in terms of return on equity, return on investment and return on assets.

JNJ has had variable solvency over the past five years. The company carries more debt than its industry and sector rivals, with a debt-to-equity ratio of 25.02, versus an industry average of 9.38 and a sector average of 19.20. This debt load leaves JNJ less solvent than their rivals. The company's current ratio has been below 2 in four of the past five years, whereas the industry average is 4.06 and the sector average is 3.72. JNJ had been building their solvency, with a current ratio that rose for three consecutive years, but the acquisitions of 2006 eroded solvency, dropping the current ratio from 2.49 in 2005 to 1.20. In 2007, JNJ.....

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