HW1-2 (20 points)

Using the data for Johnson & Johnson (NYSE:JNJ), presented below:

Johnson & Johnson
Selected Financial Data
For the Years 2014 to 2018
Fiscal Year	2018	2017	2016	2015	2014
Sales	$ 81,534	$ 76,481	$ 71,937	$ 70,200	$ 74,334
EBIT	21,253	19,565	21,350	18,368	20,929
Interest Expense	1,194	1,017	763	552	518
Net Income	15,297	1,300	16,540	15,409	16,323
Basic EPS	6.67	1.34	6.33	5.89	6.29
Total Assets	152,954	157,303	141,208	133,411	131,119
Accounts Payable	7,537	7,310	6,918	6,668	7,633
Total Liabilities	93,202	97,143	70,790	62,261	61,367
Retained Earnings	106,216	101,793	110,551	103,879	97,245
Net Cash from Operating Activities	22,201	21,056	18,767	19,279	18,471
Free Cash Flow	18,531	17,777	15,541	15,816	14,757

1. Calculate the ratio of each years data to the previous year for each of the above items for JNJ, and describe in percentage. For example, for the year 2018, the ratio for sales is $81,534/$76,481=1.06607 (Analysis 4pts).
2. From your calculations in part a, calculate each years rate of growth. Using the example in part a, the ratio is 1.06607, so the percentage growth in sales for 2018 is 1.06607-1 or 6.607% (Identify and Access Needed Information 4pts).
3. Calculate the average growth rate (using the AVERAGE function) of each of the above items using the results you calculated in part b. These averages are arithmetic averages (Analysis 4 pts)
4. Use the GEOMEAN function to estimate the compound annual average growth rate (CAGR) for each of the above items using the results that you calculated in part a. Be sure to subtract 1 from the result to arrive at a percent change. These are geometric averages (Use Information Effectively to Accomplish a Specific Purpose 4 pts).
5. Interpretation: Please include your written description in the interpretation tab. If you do not complete this section with your words or leave the interpretation tab as a blank, you receive 0 point in this HW (Use Information Effectively to Accomplish a Specific Purpose 4 pts).
   1. Compare the results from your answer in c) to those for d) for each items. Is it true that the arithmetic average growth rate is always greater than or equal to the geometric average (CAGR)?
   2. Contrast the results for the geometric averages to those for the arithmetic average for the variables listed below. What do your observe about the differences in the two growth estimates for Sales and Retained Earnings? What do you observe about the differences in the two estimates for Net Cash from Operations and Net Income? Hint: Look at the results from part b (the individual yearly growth rate) for each variable to draw some conclusions about the variation between the arithmetic and geometric averages.