*RESPOND TO BOTH STUDENT'S FINANCIAL ANALYSIS OF THE COMPANY THEY CHOSE* IN YOUR OWN WORDS! 200 WORD MINIMUM FOR EACH POST

STUDENT 1: JOHNSON & JOHNSON Liquidity Ratio: Quick Ratio

• Johnson and Johnson (JNJ): 1.11
• Pharmaceutical Industry average: 0.74 Liquidity ratios show a companys ability to pay off any of its short-term debt (Rothaermel, 2021). This shows the company has enough liquid assets to be converted into cash to meet its current obligations 1.11 times. It shows JNJ would be able to pay debt due soon with assets that can be converted to cash in a relatively short period of time. JNJs Quick Ratio is higher than the industry average. This shows most of the industry cannot pay its debts off entirely. Companies generally have higher amounts of debt because of the funding they put towards research and development. JNJ could use the excess liquid assets to put into research and development to keep up with the competitive market. Current Ratio:
• JNJ: 1.35
• Industry Average: 1.00 The Current Ratio measures whether the company has enough liquid assets to be converted into cash to meet its current obligations (Financial, n.d.). It differs from the quick ratio because the quick ratio considers only the highly liquid assets, while the current ratio considers current assets which includes things like inventory. JNJ has enough assets to cover all of their short-term debts, and as we see in the current ratio, this is because they may have higher levels of inventory compared to the industry. Financial leverage Ratio: Debt-Equity Ratio
• JNJ: 0.46
• Industry Average: 0.07 A Financial Leverage ratio is the degree to which a firm relies on its debt versus its equity (Rothaermel, 2021). The Debt-to-Equity ratio takes a companys liabilities and compares it to the companys shareholder equity. This ratio shows whether the company leans towards debt financing or equity financing (Financial, n.d.). This shows JNJ relies more heavily on debt rather than equity compared to the industry. The pharmaceutical industry average indicates companies are using retained earnings to finance, while JNJ is using more debt to finance themselves. Having more debt, especially in the pharmaceutical industry, is riskier for its investors. JNJ could be using more of their retained earnings to finance things like research and development. This is a safer option than using debts. Total Debt Ratio:
• JNJ: 0.59
• Industry Average: 0.34 The total debt ratio shows how many debts a company has compared to how many assets it has (Financial, n.d.). This again indicates that JNJ is using heavy amounts of debt to finance their operations, compared to the rest of the industry. Asset utilization Ratio: Inventory Turnover Ratio
• JNJ: 3.03
• Industry Average: 3.63 Asset Utilization Ratios show how effectively a firm is managing its assets (Rothaermel, 2021). The Inventory Turnover Ratio tells us how many times JNJ cycles through its inventory every year (Financial, n.d.). Compared to the industry, JNJ cycles through their inventory a little bit slower than average. This means they are holding on to their inventory a little longer than most companies in the pharmaceutical industry. Holding inventory for longer periods of time is more expensive for the company. Receivables Turnover Ratio:
• JNJ: 6.50
• Industry Average: 5.09 The Receivables Turnover Ratio shows how often a firm is able to collect its receivables and convert it into cash within a period (Financial, n.d.). JNJ is higher than the industry average. This means they are faster at converting their receivables into cash compared to the pharmaceutical industry. Profitability Ratio: Return on Assets
• JNJ: 11.70
• Industry Average: 9.47 Profitability ratios show how effectively a company is utilizing its resources (Rothaermel, 2021). A return on assets ratio shows how effectively a companys investments are generating revenue (Financial, n.d.). JNJs return on assets is higher than the pharmaceutical industry average. This means they are using their assets more efficiently than the average of the companies in the industry. JNJ is making substantially more profits per dollar of assets. Return on Equity
• JNJ: 30.4
• Industry Average: 14.55 Return on Equity shows what the rate of return that the owners of a stock of a company are receiving on the shares they own (Financial, n.d.). JNJ is higher than the industry average, which is good for their stockholders. JNJ is efficient with their equity compared to the market. Market Value Ratio: Price-earnings Ratio
• JNJ: 21.07
• Industry Average: 20 A Market Value ratio shows returns earned by shareholders who hold a companys stock (Rothaermel, 2021). The P/E ratio compares the companys share price to the companys EPS. This shows whether a company is overvalued or undervalued in a market. JNJs P/E ratio is higher than the pharmaceutical industry average. This could mean that JNJ is valued too highly for the industry. This could also mean JNJ is doing well in the market and is experiencing growth.

STUDENT 2:

	BD (Becton, Dickinson, and Company)	3M Company	Cardinal Health, Inc.	Medtronic Plc
Liquidity Ratios
Current Ratio	1.33	1.70	1.12	2.65
Quick Ratio	0.90	1.15	.59	2.10
Long-Term Solvency Ratios
Total Debt Ratio	0.56	0.68	0.96	0.45
Debt-Equity Ratio	0.74	1.16	3.48	0.51
Asset Management Ratios
Inventory Turnover	3.87	4.07	11.20	2.42
Receivables Turnover	8.27	7.55	18.56	5.96
Profitability Ratios
Profit Margin	10.33	16.74	0.38	11.70
Return on Assets	3.26	12.53	1.44	3.84
Return on Equity	8.44	42.42	37.38	6.85
Market Value Ratios
Price-Earnings Ratio	46.89	14.69	28.26	28.90
Source for all financial ratios otherwise noted: Gale Business Insights: Essentials

Liquidity Ratios Liquidity ratios relate current assets or cash flows to liabilities or expenses to show a firms ability to meet financial obligations (Pearce & Doh, 2002). The liquidity ratios used for the financial analysis are the current ratio and quick ratio. The current ratio for Becton, Dickinson, and Company is greater than 1.0 which implies Becton, Dickinson, and Company can pay their current liabilities with their current assets. When looking at similar companies in comparison Medtronic Plc has a current ratio of 2.65. Medtronic Plc has more than enough cash to meet their current obligations, whereas Becton, Dickinson, and Company have enough cash to meet their current obligations, but Medtronic Plc has $2.65 in current assets to every dollar. Becton, Dickinson, and Company have $1.33 in current assets to every dollar which means Medtronic Plc currently is more favorable at meeting their current obligations. 3M Company also has higher current ratio and is more favorable than Becton, Dickinson, and Company, but Becton, Dickinson, and Company are more favorable than Cardinal Health, Inc who is the lowest in comparison to the other firms with a current ratio of 1.12. All four firms in the industries are favorable and able to meet their current obligations but there is some caution when it comes to looking at these companies quick ratio. The quick ratio uses liquid assets as a measure of liquidity. Current assets other than stocks and prepaid expenses are considered as quick assets (Johri & Maheshwari, 2015, p. 42). The quick ratio is acceptable if it meets or exceeds 1.0. The quick ratio for Becton, Dickinson, and Company is 0.90 which below the 1.0 but not significantly lower than Becton, Dickinson, and Companys current ratio of 1.33. What this may indicate for Becton, Dickinson, and Company is their current assets could be weighted down with inventory. Cardinal Health, Inc. has a quick ratio of .59 significantly lower than their current ratio of 1.12 which could raise concern that Cardinal Health, Inc. will not be able to convert their assets to cash as quickly in the short term. Liquidity ratios worsen when current, liquid assets shrink in relation to total assets, as occurs when profitability and cash flows decrease during the decline phase (Pearce & Doh, 2002). Cardinal Health, Inc. may be experiencing a shrinkage of their current assets in relation to their total assets which could explain the companys lower current and quick ratios. Long-Term Solvency RatioS Leverage ratios provide an indication of the long-term solvency of the firm. Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratios measure the extent to which the firm is using long term debt (Johri & Maheshwari, 2015, p. 42). The long-term solvency ratios used for the financial analysis are the total debt ratio and debt-equity ratio. The total debt ratio for Becton, Dickinson, and Company is low at 0.56 which is under the 1.0 and indicates the firm is not financing their assets with debts. The debt-to-equity ratio indicates the extent to which the firm relies on debt financing (Johri & Maheshwari, 2015, p. 42). Becton, Dickinson, and Company debt-to-equity ratio are also low like their total debt ratio which implies the firm has lower debt with limited risk associated with the investment in the firms equity. Becton, Dickinson, and Companys debt-to-equity ratio of 0.74 therefore indicates the firm can minimize their liabilities to the shareholder equity. Unlike Cardinal Health, Inc. that has a total debt ratio of 0.96 and debt-to-equity ratio of 3.48 which implies high financial leverage or debt-to-equity ratio that indicates possible difficulty in paying interest and principal while obtaining more funding (Johri & Maheshwari, 2015, p. 43). Cardinal Health, Inc. is high risk which indicates they firms debt is being financed with the firms assets. 3M Company has a low total debt ratio at 0.68 and the firms debt-to-equity ratio is 1.16 which is higher than Becton, Dickinson, and Company but still minimizes their liabilities to shareholder equity. Medtronic Plc has a total debt ratio of 0.45 and a debt-to-equity ratio of 0.51 which indicates the company is minimizing the firms debt. Medtronic Plc, 3M Company, and Becton, Dickinson, and Company are showing similarities in their financial business plans with less risk compared to Cardinal Health, Inc. who is operating at high risk that indicates the firm is taking on debt to finance the firms assets. Asset Management RatioS Asset management ratios are important to have the right amount invested in assets (Ehrhardt, 2020, p.107). The two asset management ratios used for the financial analysis are inventory turnover and receivables turnover. Becton, Dickinson, and Company, 3M Company, and Medtronic Plc are indicating a low inventory turnover ratio averaging at 3.45 which indicates these three firms could be holding goods not worth their stated value (Ehrhardt, 2020, p. 111). Cardinal Health, Inc. has an inventory turnover of 11.20 which is greater than the industry averages for medical supply companies at 10.9 (CSIMarket.com, 2022). Cardinal Health, Inc. is holding high levels of inventory that add to net operating working capital, which reduces free cash flow, which leads to lower stock prices (Ehrhardt, 2020, p. 111). Due to the below average inventory turnover Becton, Dickinson, and Company, 3M Company, and Medtronic Plc are not able to sell their inventory as quickly as Cardinal Health, Inc. who is well above industry average. The receivables turnover ratio indicates the frequency a firm can collect revenues. Becton, Dickinson, and Company, 3M Company, and Medtronic PLC are averaging 7.26 at collecting revenues compared to Cardinal Health, Inc. who is collecting revenues at 18.56. Cardinal Health, Inc. can collect revenues at a quicker rate than the other three firms which enables Cardinal Health, Inc.to utilize these revenues more frequently to cover other needs, but Becton, Dickinson, and Company are still able to collect the firms revenues at 8.27 which is higher than Medtronic Plc and 3M Company. Profitability Ratios Profitability ratios are used to show the combined effects of liquidity, asset management, and debt on operating and financial results (Ehrhardt, 2020, p. 104). The three profitability ratios used for the financial analysis are profit margin, return on assets (ROA), and return on equity (ROE). The higher the profit margin ratio indicates higher profits generated from the firms sales. Becton, Dickinson, and Company, 3M Company, and Medtronic Plc are all generating stronger profits whereas Cardinal Health, Inc is generating a low profit margin. The return on assets (ROA) ratio is measuring the net income to total assets and the higher the ROA indicates the profitability these four firms are compared to these firms assets. Becton, Dickinson, and Company are not the highest in the industry compared to 3M Company, but the firm is still showing profitability. The ROE is the return on stockholders equity and even though Becton, Dickinson, and Company are lower in comparison to 3M Company and Cardinal Health, Inc. the firms is still showing an 8.44% ROE. Market Value Ratio Market value ratios relate a firms stock price to its earnings, cash flow, and book value per share (Ehrhardt, 2020, p. 117). The market value ratio used for this financial analysis is price-earnings ratio. The price-earnings ratios are higher for firms with strong growth prospects (Ehrhardt, 2020, p.117). Becton, Dickinson, and Company have a significantly higher price-earning ratio compared to the other three firms at 46.89 which would relate to investors that Becton, Dickinson, and Company is worth investing due higher earning potential.