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Johnson & Johnson (JNJ) | Analysis of Investments

Investment Accounting Policy

Cash Equivalents

Johnson & Johnson considers securities with maturities of three months or less, when purchased, to be cash equivalents.

Investments

Short-term marketable securities are carried at cost, which approximates fair value. Investments classified as available-for-sale are carried at estimated fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income. Long-term debt securities that Johnson & Johnson has the ability and intent to hold until maturity are carried at amortized cost. Management determines the appropriate classification of its investment in debt and equity securities at the time of purchase and re-evaluates such determination at each balance sheet date. Johnson & Johnson periodically reviews its investments in equity securities for impairment and adjusts these investments to their fair value when a decline in market value is deemed to be other than temporary. If losses on these securities are considered to be other than temporary, the loss is recognized in earnings.

Source: Johnson & Johnson, Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Johnson & Johnson, adjustment to Net Earnings Attributable To Johnson & Johnson

USD $ in millions

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  12 months ended Dec 30, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
Net earnings attributable to Johnson & Johnson (as reported) 10,853  9,672  13,334  12,266  12,949 
Add: Securities (253) 424  54  (55) (59)
Net earnings attributable to Johnson & Johnson (adjusted) 10,600  10,096  13,388  12,211  12,890 

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Johnson & Johnson, adjusted ratios

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    Dec 30, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  Net Profit Margin
Reported net profit margin 16.14% 14.87% 21.65% 19.82% 20.31%
Adjusted net profit margin 15.77% 15.53% 21.74% 19.73% 20.22%
  Return on Equity (ROE)
Reported ROE 16.74% 16.94% 23.57% 24.25% 30.46%
Adjusted ROE 16.35% 17.69% 23.66% 24.14% 30.32%
  Return on Assets (ROA)
Reported ROA 8.94% 8.51% 12.96% 12.95% 15.25%
Adjusted ROA 8.74% 8.88% 13.01% 12.90% 15.18%
Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Johnson & Johnson's adjusted net profit margin deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. Johnson & Johnson's adjusted ROE deteriorated from 2010 to 2011 and from 2011 to 2012.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Johnson & Johnson's adjusted ROA deteriorated from 2010 to 2011 and from 2011 to 2012.

Adjusted Net Profit Margin

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    Dec 30, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  As Reported
Net earnings attributable to Johnson & Johnson (USD $ in millions) 10,853  9,672  13,334  12,266  12,949 
Sales to customers (USD $ in millions) 67,224  65,030  61,587  61,897  63,747 
   
Net profit margin1 16.14% 14.87% 21.65% 19.82% 20.31%
  Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings attributable to Johnson & Johnson (USD $ in millions) 10,600  10,096  13,388  12,211  12,890 
Sales to customers (USD $ in millions) 67,224  65,030  61,587  61,897  63,747 
   
Adjusted net profit margin2 15.77% 15.53% 21.74% 19.73% 20.22%

2012 Calculations

1 Net profit margin = 100 × Net earnings attributable to Johnson & Johnson ÷ Sales to customers
= 100 × 10,853 ÷ 67,224 = 16.14%

2 Adjusted net profit margin = 100 × Adjusted net earnings attributable to Johnson & Johnson ÷ Sales to customers
= 100 × 10,600 ÷ 67,224 = 15.77%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Johnson & Johnson's adjusted net profit margin deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.

Adjusted Return On Equity (ROE)

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    Dec 30, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  As Reported
Net earnings attributable to Johnson & Johnson (USD $ in millions) 10,853  9,672  13,334  12,266  12,949 
Shareholders’ equity (USD $ in millions) 64,826  57,080  56,579  50,588  42,511 
   
ROE1 16.74% 16.94% 23.57% 24.25% 30.46%
  Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings attributable to Johnson & Johnson (USD $ in millions) 10,600  10,096  13,388  12,211  12,890 
Shareholders’ equity (USD $ in millions) 64,826  57,080  56,579  50,588  42,511 
   
Adjusted ROE2 16.35% 17.69% 23.66% 24.14% 30.32%

2012 Calculations

1 ROE = 100 × Net earnings attributable to Johnson & Johnson ÷ Shareholders’ equity
= 100 × 10,853 ÷ 64,826 = 16.74%

2 Adjusted ROE = 100 × Adjusted net earnings attributable to Johnson & Johnson ÷ Shareholders’ equity
= 100 × 10,600 ÷ 64,826 = 16.35%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. Johnson & Johnson's adjusted ROE deteriorated from 2010 to 2011 and from 2011 to 2012.

Adjusted Return On Assets (ROA)

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    Dec 30, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  As Reported
Net earnings attributable to Johnson & Johnson (USD $ in millions) 10,853  9,672  13,334  12,266  12,949 
Total assets (USD $ in millions) 121,347  113,644  102,908  94,682  84,912 
   
ROA1 8.94% 8.51% 12.96% 12.95% 15.25%
  Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings attributable to Johnson & Johnson (USD $ in millions) 10,600  10,096  13,388  12,211  12,890 
Total assets (USD $ in millions) 121,347  113,644  102,908  94,682  84,912 
   
Adjusted ROA2 8.74% 8.88% 13.01% 12.90% 15.18%

2012 Calculations

1 ROA = 100 × Net earnings attributable to Johnson & Johnson ÷ Total assets
= 100 × 10,853 ÷ 121,347 = 8.94%

2 Adjusted ROA = 100 × Adjusted net earnings attributable to Johnson & Johnson ÷ Total assets
= 100 × 10,600 ÷ 121,347 = 8.74%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Johnson & Johnson's adjusted ROA deteriorated from 2010 to 2011 and from 2011 to 2012.