A. Use the financial statements provided to complete the analysis of the companies using the financial ratios required in Table 1.

B. Complete Table 1 Download Table 1 as required in instruction 1 and use it as a reference to answer the analysis questions:

1. Calculate the financial indicators of the firms for the year 2018 and fill in the spaces marked in the table.
2. Compare the performance of both companies with each other, for each of the calculated indicators and determine if it is necessary to make any adjustment or adjustments to better position the firm with the lowest performance, facing the end of the next fiscal year. Explain what adjustments you propose and why.
3. Table 1 also provides the financial indicators of the chemicals and related products industry (Chemicals and Allied Products) for the year 2018. This will allow you to compare the performance of both firms with the industry in which they compete for the same year.

• Do you understand that the performance of firms is superior to the average performance of their competitors in the market? Justify your answer.
• What adjustments or changes would you recommend to make each of the firms more attractive to shareholders and other stakeholders? Justify your answer.
• 4.If you had the opportunity, which of the firms would you invest in based on the result of your analysis of both companies and the comparison with the industry? If you would not invest, explain your reasons according to the results obtained

table 1

Company Name:	Year 2018	Chemicals and Allied Products Industry Ratios
..
Solvency or Debt Ratios	Merck	J&J	2018
Debt ratio	.	.	0.47
Debt-to-equity ratio	.	.	0.38
Interest coverage ratio	.	.	-9.43
Liquidity Ratios
Current ratio	.	.	3.47
Quick ratio	.	.	2.12
Cash ratio	.	.	2.24
Profitability Ratios
Profit margin	.	.	-93.4%
ROE (Return on equity), after tax	.	.	-248.5
ROA (Return on assets)	.	.	-146.5
Gross margin	.	.	55.3%
Operating margin (Return on sales)	.	.	-42.9%
Activity or Efficiency Ratios
Asset turnover	.	.	1.08
Receivables turnover (days)	.	.	16
Inventory turnover (days)	.	.	36
Price Ratios
Dividend Payout Ratio	.	.	0.15

Finantial Statement

Johnson & Johnson (JNJ) Balance Sheet

December 31, 2018 ($ in millions)

ASSETS

Current Assets

Cash, cash equivalents and short-term investments

$19,687

Receivables

14,098

Inventory

9,549

Other current assets

2,699

Total Current Assets:

46,033

Noncurrent Assets

Property, plant and equipment, net

17,035

Net Intangible assets (including goodwill)

78,064

Other noncurrent assets

11,822

Total Noncurrent Assets:

106,921

TOTAL ASSETS:

$152,954

LIABILITIES AND EQUITY

Liabilities

Current Liabilities

Accounts Payable

7,537

Accrued liabilities

11,517

Short term debt

2,800

Other noncurrent liabilities

9,376

Total current liabilities:

31,230

Noncurrent Liabilities

Long-term debt and lease obligation

27,684

Liabilities, other than long-term debt (pension, deferred tax, other)

34,288

Total noncurrent liabilities:

61,972

TOTAL LIABILITIES:

93,202

Stockholdersequity

Common stock

3,120

Treasury stock, value

-34,362

Accumulated other comprehensive loss

-15,222

Retained earnings

106,216

Total stockhholdersequity

59,752

Total Liabilities and StockholdersEquity:

$152,954

Johnson & Johnson (JNJ) Income Statement
For period ending December 31, 2018 ($ in millions)
Revenues
Revenues, net	$81,581
Cost of Revenue	-27,091
Gross profit:	54,490
Operating Expenses	-34,692
Operating Income:	19,798
Nonoperating income (expense)	-794
Interest and debt expense	-1,005
Income from continuing operations before income taxes:	17,999
Income tax expense	-2,702
Net Income available to stockholder	$15,297
Dividends paid to Stockholders	-9,494
Retained Earnings	$5,803

`

Merck & Company, Inc. (MRK) Balance Sheet
December 31, 2018 ($ in millions)
ASSETS
Current Assets
Cash, cash equivalents and short-term investments	$8,864
Receivables	7,071
Inventory	5,440
Other current assets	4,500
Total Current Assets:	25,875
Noncurrent Assets
Property, plant and equipment, net	13,291
Net Intangible assets (including goodwill)	29,684
Other noncurrent assets	13,787
Total Noncurrent Assets:	56,762
TOTAL ASSETS:	$82,637
LIABILITIES AND EQUITY
Liabilities
Current Liabilities
Accounts Payable	3,318
Accrued liabilities	3,429
Short term debt	5,308
Other noncurrent liabilities	10,151
Total current liabilities:	22,206
Noncurrent Liabilities
Long-term debt and lease obligation	19,806
Liabilities, other than long-term debt (pension, defferred tax, other)	13,743
Total noncurrent liabilities:	33,549
TOTAL LIABILITIES:	55,755
Stockholders'equity
Common stock	1,788
Treasury stock, value	-50,929
Additional paid in capital	38,808
Accumulated other comprehensive loss	-5,545
Retained earnings	42,579
Stockholders'equity attributable to noncontrolling interest	181
Total stockhholders'equity	26,882
Total Liabilities and Stockholders'Equity:	$82,637

Merck & Company, Inc. (MRK) Income Statement
For period ending December 31, 2018 ($ in millions)
Revenues
Revenues, net	$42,294
Cost of Revenue	-13,509
Gross profit:	28,785
Operating Expenses	-20,486
Operating Income:	8,299
Nonoperating income (expense)	402
Interest and debt expense	-772
Other undisclosed income (loss) from continuing operations before income taxes:	772
Income from continuing operations before income taxes:	8,701
Income tax expense	-2,508
Net Income available to stockholder	$6,193
Dividends paid to Stockholders	-5,172
Retained Earnings	$1,021

MBA 5050 2.2