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Johnson & Johnson (JNJ)
Analysis of Investments
Difficulty: Advanced
Investment Accounting Policy
Investments classified as held to maturity investments are reported at amortized cost and realized gains or losses are reported in earnings. 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. Available-for-sale securities available for current operations are classified as current assets otherwise, they are classified as long term. 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 reviews its investments in equity securities for impairment and adjusts these investments to fair value through earnings, as required.
Source: 10-K (filing date: 2019-02-20).
Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
Johnson & Johnson, adjustment to Net Earnings
US$ in millions
| 12 months ended | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 28, 2014 | |
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| Net earnings (adjusted) | |
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Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).
Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)
Johnson & Johnson, adjusted ratios
Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).
| 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 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | Johnson & Johnson’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | Johnson & Johnson’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
Johnson & Johnson, Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Net profit margin = 100 × Net earnings ÷ Sales to customers
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Sales to customers
= 100 × ÷ =
| 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 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).
2018 Calculations
1 ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net earnings ÷ Shareholders’ equity
= 100 × ÷ =
| 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 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).
2018 Calculations
1 ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × ÷ =
| 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 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |