Johnson & Johnson (JNJ)

Long-term Debt and Solvency Analysis

Difficulty: Beginner

Solvency ratios also known as long-term debt ratios measure a company’s ability to meet long-term obligations.

Johnson & Johnson, debt and solvency ratios

	Dec 30, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 28, 2014
Debt to equity	0.51	0.57	0.39	0.28	0.27
Debt to capital	0.34	0.37	0.28	0.22	0.21
Interest coverage	18.91	19.92	28.28	35.78	39.58

Ratio	Description	The company
Debt-to-equity ratio	A solvency ratio calculated as total debt divided by total shareholders’ equity.	Johnson & Johnson’s debt-to-equity ratio deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.
Debt-to-capital ratio	A solvency ratio calculated as total debt divided by total debt plus shareholders’ equity.	Johnson & Johnson’s debt-to-capital ratio deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Ratio	Description	The company
Interest coverage ratio	A solvency ratio calculated as EBIT divided by interest payments.	Johnson & Johnson’s interest coverage ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

Johnson & Johnson, debt to equity calculation, comparison to benchmarks

	Dec 30, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 28, 2014
Selected Financial Data (USD $ in millions)
Loans and notes payable	2,796	3,906	4,684	7,004	3,638
Long-term debt, excluding current portion	27,684	30,675	22,442	12,857	15,122
Total debt	30,480	34,581	27,126	19,861	18,760
Shareholders’ equity	59,752	60,160	70,418	71,150	69,752
Ratio
Debt to equity¹	0.51	0.57	0.39	0.28	0.27
Benchmarks
Debt to Equity, Competitors
Abbott Laboratories	0.64	0.90	1.07	0.42	0.36
AbbVie Inc.	—	7.33	7.95	8.03	8.62
Allergan PLC	0.37	0.41	0.43	0.56	0.55
Amgen Inc.	2.71	1.40	1.16	1.12	1.19
Biogen Inc.	0.46	0.47	0.54	0.70	0.05
Bristol-Myers Squibb Co.	0.52	0.68	0.41	0.47	0.53
Celgene Corp.	3.29	2.29	2.17	2.41	1.05
Eli Lilly & Co.	1.30	1.18	0.74	0.55	0.52
Gilead Sciences Inc.	1.28	1.64	1.39	1.20	0.80
Merck & Co. Inc.	0.94	0.71	0.62	0.59	0.44
Pfizer Inc.	0.66	0.61	0.71	0.60	0.51
Regeneron Pharmaceuticals Inc.	0.08	0.11	0.11	0.10	0.18
Debt to Equity, Sector
Pharmaceuticals & Biotechnology	0.90	0.84	0.76	0.69	0.55
Debt to Equity, Industry
Health Care	0.82	0.81	0.76	0.70	0.55

2018 Calculations

¹ Debt to equity = Total debt ÷ Shareholders’ equity
= 30,480 ÷ 59,752 = 0.51

Ratio	Description	The company
Debt-to-equity ratio	A solvency ratio calculated as total debt divided by total shareholders’ equity.	Johnson & Johnson’s debt-to-equity ratio deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Johnson & Johnson, debt to capital calculation, comparison to benchmarks

	Dec 30, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 28, 2014
Selected Financial Data (USD $ in millions)
Loans and notes payable	2,796	3,906	4,684	7,004	3,638
Long-term debt, excluding current portion	27,684	30,675	22,442	12,857	15,122
Total debt	30,480	34,581	27,126	19,861	18,760
Shareholders’ equity	59,752	60,160	70,418	71,150	69,752
Total capital	90,232	94,741	97,544	91,011	88,512
Ratio
Debt to capital¹	0.34	0.37	0.28	0.22	0.21
Benchmarks
Debt to Capital, Competitors
Abbott Laboratories	0.39	0.47	0.52	0.30	0.27
AbbVie Inc.	1.27	0.88	0.89	0.89	0.90
Allergan PLC	0.27	0.29	0.30	0.36	0.35
Amgen Inc.	0.73	0.58	0.54	0.53	0.54
Biogen Inc.	0.31	0.32	0.35	0.41	0.05
Bristol-Myers Squibb Co.	0.34	0.40	0.29	0.32	0.35
Celgene Corp.	0.77	0.70	0.68	0.71	0.51
Eli Lilly & Co.	0.57	0.54	0.42	0.35	0.34
Gilead Sciences Inc.	0.56	0.62	0.58	0.54	0.45
Merck & Co. Inc.	0.48	0.42	0.38	0.37	0.31
Pfizer Inc.	0.40	0.38	0.41	0.38	0.34
Regeneron Pharmaceuticals Inc.	0.07	0.10	0.10	0.09	0.15
Debt to Capital, Sector
Pharmaceuticals & Biotechnology	0.47	0.46	0.43	0.41	0.35
Debt to Capital, Industry
Health Care	0.45	0.45	0.43	0.41	0.36

2018 Calculations

¹ Debt to capital = Total debt ÷ Total capital
= 30,480 ÷ 90,232 = 0.34

Ratio	Description	The company
Debt-to-capital ratio	A solvency ratio calculated as total debt divided by total debt plus shareholders’ equity.	Johnson & Johnson’s debt-to-capital ratio deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Johnson & Johnson, interest coverage calculation, comparison to benchmarks

	Dec 30, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 28, 2014
Selected Financial Data (USD $ in millions)
Net earnings	15,297	1,300	16,540	15,409	16,323
Add: Income tax expense	2,702	16,373	3,263	3,787	4,240
Add: Interest expense, net of portion capitalized	1,005	934	726	552	533
Earnings before interest and tax (EBIT)	19,004	18,607	20,529	19,748	21,096
Ratio
Interest coverage¹	18.91	19.92	28.28	35.78	39.58
Benchmarks
Interest Coverage, Competitors
Abbott Laboratories	4.48	3.47	4.28	20.53	17.79
AbbVie Inc.	4.86	7.72	8.53	10.24	6.52
Allergan PLC	-6.53	-8.48	-1.19	-2.71	-3.16
Amgen Inc.	7.86	8.36	8.27	8.29	6.21
Biogen Inc.	30.41	21.45	19.97	50.79	134.27
Bristol-Myers Squibb Co.	33.61	27.18	36.42	12.29	12.73
Celgene Corp.	7.52	9.26	5.74	7.51	14.22
Eli Lilly & Co.	14.95	10.77	19.22	18.31	21.16
Gilead Sciences Inc.	8.24	13.10	18.74	32.48	37.06
Merck & Co. Inc.	12.27	9.65	7.72	9.04	24.61
Pfizer Inc.	10.03	10.69	8.04	8.48	10.00
Regeneron Pharmaceuticals Inc.	91.55	83.75	185.82	87.03	21.76
Interest Coverage, Sector
Pharmaceuticals & Biotechnology	8.96	9.01	10.57	12.56	16.13
Interest Coverage, Industry
Health Care	8.71	8.71	9.62	11.68	15.13

2018 Calculations

¹ Interest coverage = EBIT ÷ Interest expense
= 19,004 ÷ 1,005 = 18.91

Ratio	Description	The company
Interest coverage ratio	A solvency ratio calculated as EBIT divided by interest payments.	Johnson & Johnson’s interest coverage ratio deteriorated from 2016 to 2017 and from 2017 to 2018.