3c: Ratio Analysis: Debt Ratio and Current Ratio Learning Objective: Interpret the balance sheet numbers to assess company's debt position and ability to meet current debt obligations Calculate and comment on the debt and current ratios for the current and prior years. The debt ratio shows you how much of the company's assets are financed with debt. The debt ratio is expressed as a percentage. Carry your results to two decimal places as previously explained on page 16. The higher the ratio, the more highly leveraged (riskier) a company is. The current ratio indicates the ability of a company to meet its current obligations. The current ratio is expressed as a number (not a percentage). For example, if current assets are $200,000 and current liabilities are $100,000, the current ratio would be 2.00. Carry this result to two decimal places. 3c: Ratio Analysis: Debt Ratio and Current Ratio Formula Calculation Result Debt Ratio -Current Total Liabilities/ year Total Assets Debt Ratio-prior year Total Liabilities/ Total Assets Current Ratio-current Current Assets/ year Current Liabilities Current Ratio-prior Current Assets/ year Current Liabilities What does the change in the company's debt ratio tell you about the financial health of the company? What does the change in the company's current ratio tell you about the financial health of the company? 18 JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS At January 3, 2021 and December 29, 2019 (Dollars in Millions Except Share and Per Share Amounts) (Note 1) 2020 2019 $ 13,985 11.200 13.576 9,344 3.132 51,237 18.766 3.402 36,393 8.534 6,562 174,894 17.305 1.982 14.481 9,020 2,392 94 45.274 17,658 47.643 33.639 7,819 5,699 157,728 $ Assets Current assets Cash and cash equivalents (Notes 1 and 2) Marketable securities (Notes 1 and 2) Accounts receivable trade, less allowances for doubtful accounts $293 (2019.5226) Inventories (Notes 1 and 3) Prepaid expenses and other receivables Assets held for sale (Note 18) Total current assets Property, plant and equipment, net (Notes 1 and 4) Intangible assets, net (Notes 1 and 5) Goodwill (Notes 1 and 5) Deferred taxes on income (Note 8) Other assets Total assets Liabilities and Shareholders' Equity Current liabilities Loans and notes payable (Note 7) Accounts payable Accrued liabilities Accrued rebates, returns and promotions Accrued compensation and employee related obligations Accrued taxes on income (Note 8) Total current liabilities Long-term debt (Note 7) Deferred taxes on income (Note 8) Employee related obligations (Notes 9 and 10) Long-term taxes payable (Note 1) Other liabilities Total liabilities Commitments and Contingencies (Note 19) Shareholders' equity Preferred stock without par value (authorized and unissued 2,000,000 shares) Common stock - par value S1.00 per share (Note 12) (authorized 4.320,000,000 shares, issued 3.119.843,000 shares) Accumulated other comprehensive income (loss) (Note 13) Hetained earnings 2.631 9.505 13,968 11.513 3,484 1.392 42,493 32,635 7,214 10,771 6,559 11.944 111,616 1,202 8.544 9,715 10.883 1354 2,266 35.964 26.494 5.958 10,663 7.444 11.734 98,257 Less: common stock held in treasury, al cost (Notc 12) (487,331,000 shares and 487,336,000 shares) Total shareholders' equity Total liabilities and shareholders' equity 3,120 (15.242) 113.890 101,768 38,490 63,278 174,894 3,120 (15.891) 110.639 97.888 38,417 59,471 157,728 See Notes to Consolidated Financial Statements