Need a conclusion this project identifying and briefly detail the key issues the

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Need a conclusion this project identifying and briefly detail the key issues the firm could adopt, and evaluate each alternative in terms of advantage and disadvantages. Also make sure recommendations. Tell what you think the company should do. Plus, based on your overal evaluation, would recommended investing in this company? This section should be no more than one page in length
Another question id a bank manager, what ratios you would consider in analyzing a loan application from a customer ?





Final Analysis Johnson & Johnson commom size income statament 2016-2017 2016 2017 $21.94: 1.00-100.00%| $ 76.48 30.08% $25.11 | 4.53%|$ 16.37| 22.99% $ 1.301 1.001 0.33 0.21| 0.02 100.00% 32.83% 21.40% Sales Cost of good sold | $21.64 10.30 | $3.26| 0.05 $ 16.54 10.23 Tax income Net income 1.70% we can see that inspire of an inctrease in the sales, yet the company's net income has decreased this is because of increase in Cost of goods sold and income tax these were the amendrments to be done and the analysis of the income statement Johnson & Johnson commom size income statament 2016-2017 2016 2017 change Cash Accounts receivable Accounts payable Reteined earning Total assests 41.91 11.7 6.92 110.55 141.21 0.30 18.3 0.08 13.49 7.31 0.78 101.79 157.3 0.12 0.09 0.05-0.003 0.65 -0.18 0.01 0.05 -0.14 Common size balance sheet shows that in 2016, the cash was 30% of the total assets while in 2017 it decreased to 12% only the company has stopped keeping more cash with them, this might be due to the cash management or the excess cash is being used for the expansion of the company to generate more profit We can never interpret through the figures given only like $11.7 or $13.49 in

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Another question id a bank manager, what ratios you would consider in analyzing a loan application from a customer ?

Although ratios don’t make sense to the average customer, the bank will rely heavily on just 3 ratios to get a good picture of your business, so it is important for us to understand how to calculate them and more importantly what they mean and how it canbe improved. So here are the 3 important ratios that must be understood:

1.Leverage Ratio:The leverage ratio is calculated by dividing the total business liabilities by total business equity. It is suggesred that a leverage ratio over 4 to 1 would significantly reduce the chances of securing a traditional bank loan. The basic idea is that the lender doesn’t want to simply borrow in order to grow the business.So how to improve the leverage ratio? Pay off the debts and the leverage ratio will come down, or simply increase the cash balance without borrowing.

2.Loan to Value Ratio – The loan to value ratio is calculated by the total dollar amount of the loan divided by the appraised value of the collateral. Most lenders will require the appraised value of the collateral to be higher than the loan amount. The lender is looking at this ratio to see how much breathing room they have. If the business is to default on the loan and the bank ends up with the collateral, the bank wants to make sure they can sell the collateral for a value high enough to recover the entire balance of the loan.

3.Debt Service Coverage Ratio – This final ratio is a bit more complex, but still incredibly important when applying for a loan. To calculate the debt service coverage ratio is dividing the annual net income by the annual debt service. Debt service is a fancy way of saying the loan payments. This ratio tells the lender how many times it could make the loan payment with the net income. It is found that we cab make the loan payment 10 times with ther net income each year,then it is satisfactory for the business.If the business makes the loan payments 1.25 times per year, the bank is going to be nervous that if there is any negative downtrend with the business, and it would not be able to repay loan .

1COGS as a% of sales increased. But Operating expenses% seems to have decreased from (30.08%-4.53%)=25.55% in 2016 to (32.83%-21.40%)=11.43% in 2017 --resulting in increased before-tax income in the latter year. Income statement for 2016 shows greater Net Income than Taxable income--may be because of after-tax income from other sources peculiar to 2016 alone---reason why retained earnings is more in that year. 2 Current ratio is 2:1 meaning it is recommendable to maintain twice the amount of any immediate obligations likely to arise(ie. Within a year) in easily encashable(ie.liquid) current assets. More than 2 is said to be mis-management of excess curent assets losing interest on moneys unnecessarily locked-up . Less than 2 may mean inadequate backing of liquid assets ,in case of any emergent current necessities. Thus, here, 2013-2016 shows un-profitable funds lock-up in current assets . In 2017, the ratio has fallen below the normal of 2--may be due to decrease in cash balance (despite increase in $ accounts payable ) So, the company's liquidity is below normal. 3.Debt to Equity ratio The numerator ,ie. Debt has consistently increased from 2013 thro' 2017, maximum increase being in the year 2017. The denominator, ie. Equity has increased till 2015, after which it has decreased consistently in both 2016 & 2017. So debt has increased in 2017 ,but Before-tax income % on sales has increased--meaning despite interest expense , the company is able to make increased % of taxable income. This particular ratio has increased more due to reduction in equity , than increase of debt,in 2017. Reduction in total equity may be due to that said in 1 above or any repurchase of stocks. 4. Debt Ratio As a contrary to the above ratio,Yrs. 2013-2017 shows continuously more& more of debt -funding of assets ,rather than by equity or internal funds. But the point to be noted is that the company's tax income(ie. After interest expense) has increased ,despite the possible increase in interest expense. 5.Total Assets Turnover Ratio Sales generated per $ of total asset employed has been consistently, approximately 50%. This needs comparison with industry peers for proper assessment. But sales has increased to a great extent in 2017 compared to the previous years. 6.Inventory turnover On an average, inventory turns over only 3 (maximum )times ina year,ie. It takes 365/3= roughly 120 days or 4 months for inventory to be converted to sales /receivables. Which means, inventory is very slow-moving ,indicating marketing- sales needs to be improved drastically. Inventory stacking- up may also be the reason for increased current assets figure ,in the current ratio. 7.DSO Normally, customer collection is considered good if it takes up a maximium of to 30 days.But here, it takes almost 60 days or nearly 2 months to collect receivables, again lock-up of working capital for regular operations--- which may be the reason for increasingly outside funding.

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