Review Johnson and Johnson Company financials and determine the following information.

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Johnson and Johnson Financial Statement Analysis 2016 vs 2015 1. Calculate the following ratios for the company for 2016 and 2015: a. b. c. d. Return on Sales Gross Profit Income Tax Expense as a percent of Income before taxes Inventory Turnover based on end of year inventory value 2. Show the calculation for Basic EPS for 2016 and 2015 3. What percent of net income did the company give back to shareholders in the form of dividends? (show all work) 4. Are dividends an operating expense of the company? Why or why not? 5. Which of the four financial statements do dividends affect? 6. What was the price of J&J's stock at the end of 2016 and 2015? 7. Based on the end of year stock price did the company make the right decision to buy back Treasury Shares in 2016 and explain you reasoning? 8. For 2016 if the company decided instead to pay out dividends with the amount of money it spent on Treasury Stock, how much extra would each shareholder have received in dividends based on the weighted number of shares outstanding? Apple Corporation Financial Statement Analysis 2016 vs 2015 1. What percent of Apple's assets are financed by liabilities versus equity in 2016 and 2015? Based on that analysis, what does that say about the company's risk tolerance? Risky or Conservative or moderate risk and why? 2016Assets-321,686, liabilities 193,437, equity 128,249 % funded by liabilities=193437/321686=60% %funded by equity=128249/321686=40% 2015 A-290345, L 170990, E 119355 % L=170990/290345=59% % E=119355/290345=41% This shows that the company's risk tolerance is moderate. Conservative would be 40% or less of assets financed by liabilities. 2. What is Treasury Stock and why does a company engage in Treasury Stock transactions? Treasury stock is stock repurchased by the issuer and intended for retirement or resale to the public.( www.investinganswers.com/financial-dictionary/stock-market/treasury-stock-2519) There are a few reasons a company may engage in treasury stock transactions. Two of the primary reasons are if the company feels their stock price is too low and if the company is holding an excess amount of cash. If the stock price is too low, purchasing treasury stock can help to raise the stock price by stimulating demand in the market, and by shrinking the number of shares available for purchase. Shareholders do not want companies to sit on an excessive amount of cash. They would rather see it reinvested in the company to increase the value of shares, or returned to the shareholders. If the company has excess cash it can distribute this to shareholders in the form of dividends or by purchasing treasury stock. Purchasing treasury stock will increase the value of outstanding shares by shrinking total outstanding shares, thereby increasing the ownership stake of each share outstanding. 3. If the company doesn't engage in Treasury Stock transactions what three alternatives does the company have? 1) Pay out dividends 2) Re-invest in the company (expand) 3) Invest in other entities (i.e. stocks, bonds, etc.) 4. What impact does Treasury Stock have on the remaining shareholders? When a company purchases treasury stock, it increases the ownership stake of any outstanding shares. Remaining shareholders own a larger percentage of the company with each individual share. This can increase the value of the outstanding shares in the market. Also, the earning per share increase as the number of shares decreases. 5. How many shares of Treasury Stock did Apple purchase in 2016? 279,609,000 From the Consolidated Statements of Shareholder's Equity, number of shares is reflected in Thousands on statement 6. On average how much did Apple pay for each Treasury Share in 2016? If you are one of the remaining shareholders did Apple make the right decision to engage in Treasury Stock transactions during 2016? How do you know? $29,000,000,000/279,609,000=$103.71 Yes, the price per share has risen, currently at $135 Since the value per share has increased, it was a good business decision to purchase treasury stock. 7. Taking into consideration any new common stock issued what percent has the company shrunk in terms of shareholders from 2013 to 2016? Which financial statement did you use to calculate your answer? Shares outstanding as of 9/28/13-6,294,494,000 Shares outstanding as of 9/24/2016-5,336,166,000 5336166000/6294494000=85%, the number of outstanding shares has shrunk by 15% since 2013. The numbers of shares outstanding was taken from the Statement of Shareholders Equity 8. Calculate Apple's Current Ratio for 2015 and 2016? What has been the trend? What does the Current Ratio measure? 2015-89378(CA)/80610(CL) =1.1 2016-106869(CA)/79006(CL) =1.35 The trend has been to increase the ratio of current assets to current liabilities The current ratio measure a company's ability to pay off its' short term (current) liabilities with its' short term (current) assets 9. If a company has a 10:1 current ratio, why might you be concerned if you're a shareholder? Do you have the same concern if you're a vendor that supplies the company with inventory and explain why? As a shareholder I would be concerned that the company is not growing my investment well. They appear to be sitting on a large amount of cash that could likely be better used, either by reinvesting in growth or by distributing dividends to shareholders or purchasing treasury stock. As a vendor I would be very confident in the company's ability to pay my invoice as they appear to have cash far above what they need to cover their current liabilities