J&J financial analysis

The statement for J&J cash flow comprises of three major parts including cash flows used in or from operations, investments and financing activities.  For the period between 2013 and 2016, the net cash flow has not been consistent. The operating activities that have informed the cash flow over the last four years include addition to plant, property and equipment, disposal of business and assets, buying and selling of investments and other basic intangibles. The investing activities carried out by the firm over the last four years include capital expenditures on fixed and other assets , sales of various businesses and fixed assets , purchase and sale of investments.  Cash flow from various operating activities for the years between 2013 and 2016 increased consistently from $ 15.4 billion to $18.77(Morningstar, 2017). This indicates an increase in operating activities of the firm over the same period especially with cash generating activities. The cash flow related to financing activities for the 2013-2016 periods shows an inconsistent pattern and ranged between $20.56 billion 2012  and $ 6.08 B in 2013 with the other years falling in between. For the fiscal year ending in Dec. 2016 Free cash flow amounted to $ 15, 541(operations’ cash flow being $ 18,767 M and capital expenditure at $ 3,226 M (Johnson & Johnson, 2016). Free Cash Flow is among the major parameters  for measuring the earnings power – in terms of investors value – of a firm since it does not take into account DDA ( Depreciation , Depletion & Amortization) estimates. 

 The working capital for J& J has increased with time to $ 12,973 M in 2012 and there was a net increment in plant, property and equipment to $16,097M in the same year. Total assets for the firm increased to around $ 121, 347 M for the year 2012 (Morningstar, 2017). This shows increased financial operations for the company in the same year. For the year 2014, the financial operations in the company majorly consisted of current liabilities and non-current liabilities, business and assets related sales’ gain, inventories and account receivables. These amounted to $ 4.8 billion. In 2014, the financing operations included the usage of $12.3 billion for repurchase of stocks and shareholders, dividends. Also included was $ 0.8 billion as gains from debt, both long-term and short-term and $ 1.8 billion obtained from stock options and related tax benefits.   In the subsequent years, the firm financial operations have involved equity security issuer purchases where the firm was authorized to buy up to $ 5 billion of the common stock in 2014 (Johnson & Johnson, 2016).  The firm was able to purchase an aggregate of about 26.18 shares in open market transactions. In this case, 16,600,872 shares were bought in the same year.  In the same year, the sales of the products of the firm increased in the same year.  In 2016, the financial operations involved payment of & 8.6 billion as shareholders dividends and $9.0 as common stock repurchase, $7.9 billion as long-term and short-term debts proceeds and $1.2 as proceeds from other activities. There were also acquisition of $4.5 billion and $ 3.2 billion for assets. This firm had a healthy working capital base (Johnson & Johnson, 2016).

The balance sheet for the 2012 to 2016 financial periods shows a constant increase from $ 46, 116 million to $ 65,032 for the total current assets while the total non-current assets for the same period ranged from $ 75,231 M to $ 76,176. The amount decline increased in 2013 and 2015 while 2014 shows a decline. In addition, the intangible assets decreased in the same period and ranged from $ 28,752 million and & 26,876 million (Morningstar, 2017). Other assets that showed inconsistence in the same period includes other long-term assets and deferred income taxes.  In the same period, the current liabilities for the firm increased from $24,262 to $27747 million between 2012 and 2013 decline to $ 26,, 287 million in 2016. The long-term liabilities increased from $32,259 million to $ 44,503 million in the same period. The total liabilities increased consistently from $121,347 million to $ 141,208 million between 2012 and 2016 with non-current long-term liabilities taking increasing with the largest margin (Morningstar, 2017).

The revenue for J&J is shown to be almost consistent between 2012 and 2016, and ranging between $67,224 in 2012 and $74,331 million in 2014.  The little change in income over the years can be attributed to similar changes in sales of the firm’s products, such as the little change in consumer segment sales from 13.4 percent in 2014 and 13.2 percent in the following year (Morningstar, 2017).The various segments including consumer, pharmaceutical and medical devices segments also showed similar change over the same financial periods. In the same period, the cost of revenue also increased between $67,224 and $ 23,645 million. The operating expenses also increased from $ 29,697 and $ 30,234 million in the period, which can explain the lack small increment in operating income from $ 15,869 and $ 20482 million in the same period (Morningstar, 2017).

Conclusion

J&J continuous product innovation is informed by the firms increased competition in the market, and this can help the firm to retain its customers. The strong brands of the firm forms the basis of its strength and this provides an opportunity for the firm to overcomes its major weaknesses that include declining sales, increasing expenses and reduction in product prices.  The ethical values of the firm have been based on increased consumer protection and trust and the firm has been recognized and awarded for the same. The improvement of ethical standards, behavior and social responsibility arose from the 1982 incident that left people dead after they took the products of the firm. The firm has faced various law suits related to safety standards of its products which have threatened to significantly affect its market share. However, the public opinions of its products have remained fairly positive which helped the firm to overcome such challenges. The financial analysis shows that the Johnson & Johnson performance has been consistent over past period from2012 to 2016 buoyed by increasing investment activities. The working capital of the firm is quite strong given that the equity basically exceeds the liabilities

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