Covidien is an Irish company that manufactures and distributes pharmaceutical and medical device products that are similar to those sold by Johnson & Johnson. Below we present Johnson & Johnson’s profitability ratios computed in Example 5B. 1 in the chapter appendix. Use these and the excerpts of Covidien’s income statements to answer the following questions: 

a. If Johnson & Johnson’s sales are $ 71,312 million in 2013, which company is larger using sales as a measure of size? 

b. Compute Covidien’s profit margin in 2013 and 2012. 

c. Compute Covidien’s return on assets in 2013 and 2012. 

d. Compute Covidien’s return on equity in 2013 and 2012. 

e. Compare Johnson & Johnson and Covidien’s profit margins in 2013 and 2012. 

f. Compare Johnson & Johnson and Covidien’s return on assets in 2013 and 2012. 

g. Compare Johnson & Johnson and Covidien’s return on equity in 2013 and 2012.

Covidien plc (all dollars in millions)

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Balance Sheets (excerpts) End of Year Total assets Total stockholders' equity Statement of Earnings (excerpts) 2013 $19,918 S 9,242 2012 $22,257 $10,565 2011 $20,374 S 9,817 For the year Sales to customers Net earnings 2013 S10,235 S 1,700 2012 $9,851 1,905 2011 S 9.607 S 1,868 Johnson & Jolnson (from Example 5B.1 in Appendix B) Profitability Measure Profit Margin Return on Assets Return on Equity 2013 19.4% 10.9% 19.9% 2012 15.6% 8.9% 172%