QUESTION: Refer to the attached DuPont Analysis for Johnson & Johnson and, discuss the development of return on equity (ROE) over the five year period. What are the underlying reasons for the change in ROE? Make sure that in addition to substantiating your findings with ratio values, you also provide some economic meaning to the ratios.

JOHNSON & JOHNSON, DuPont Analysis ROE (return on equity) Dec-2015 Dec-2016 Dec-2017 Dec-2018 NI (net income) 21.7% 23.5% 2.2% 25.6% E (total common equity) $ 15,409.0 $ 16,540.0 $ 1,300.0 $ 15,297.0 $ 71,150.0 $ 70,418.0 $ 60,160.0 $ 59,752.0 PM (profit margin) NI (net income) 22.0% 23.0% 1.7% 18.8% S (sales) $ 15,409.0 $ 16,540.0 $ 1,300.0 $ 15,297.0 $ 70,074.0 $ 71,890.0 $ 76,450.0 $ 81,581.0 TAT (total asset turnover) S (sales) 0.53x 0.51% 0.49x 0.53x A (total assets) $ 70,074.0 $ 71,890.0 $ 76,450.0 $ 81,581.0 $ 133,411.0 $ 141,208.0 $ 157,303.0 $ 152,954.0 EM (equity multiplier) A (total assets) 1.88X 2.01x 2.61x 2.56x E (total common equity) $ 133,411.0 $ 141,208.0 $ 157,303.0 $ 152,954.0 $ 71,150.0 $ 70,418.0 $ 60,160.0 $ 59,752.0 DuPont ROE PM 21.7% 23.5% 2.2% 25.6% TAT 22.0% 23.0% 1.7% 18.8% 0.53x 0.51x 0.49x 1.88x 1.88x 2.01x 2.61x 2.56x EM 0.53% JOHNSON & JOHNSON, DuPont Analysis ROE (return on equity) Dec-2015 Dec-2016 Dec-2017 Dec-2018 NI (net income) 21.7% 23.5% 2.2% 25.6% E (total common equity) $ 15,409.0 $ 16,540.0 $ 1,300.0 $ 15,297.0 $ 71,150.0 $ 70,418.0 $ 60,160.0 $ 59,752.0 PM (profit margin) NI (net income) 22.0% 23.0% 1.7% 18.8% S (sales) $ 15,409.0 $ 16,540.0 $ 1,300.0 $ 15,297.0 $ 70,074.0 $ 71,890.0 $ 76,450.0 $ 81,581.0 TAT (total asset turnover) S (sales) 0.53x 0.51% 0.49x 0.53x A (total assets) $ 70,074.0 $ 71,890.0 $ 76,450.0 $ 81,581.0 $ 133,411.0 $ 141,208.0 $ 157,303.0 $ 152,954.0 EM (equity multiplier) A (total assets) 1.88X 2.01x 2.61x 2.56x E (total common equity) $ 133,411.0 $ 141,208.0 $ 157,303.0 $ 152,954.0 $ 71,150.0 $ 70,418.0 $ 60,160.0 $ 59,752.0 DuPont ROE PM 21.7% 23.5% 2.2% 25.6% TAT 22.0% 23.0% 1.7% 18.8% 0.53x 0.51x 0.49x 1.88x 1.88x 2.01x 2.61x 2.56x EM 0.53%