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Briefly describe the competitive landscape

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Reference no: EM132487722

The following questions relate to your company Johnson and Johnson and its competitor Merck. write answer with respect to both companies on a comparative basis by addressing those questions. The recent fiscal year end is 2016.

Question 1. Briefly describe the competitive landscape of the two companies using Michael Porter's five forces analysis (SWOT).

Question 2. Compute ROE for three years (2014, 2015 and 2016).

J&J ROE 2016 = 16540/71150 +70418/2 = 23.37%

2015= 15409/ 70418 +69752/2= 21.99%

2014 = 16323/69752+74053/2 = 22.70%

Merk ROE

2016 =3920/40,008+44676/2= 9.25%

2015= 4442/44676+48647/2= 9.52%

2014= 11920/48647+49765/2= 24.22%

Question 3. Compute RNOA and its two components (NOPM and NOAT) for three years (2014, 2015 and 2016).

J&J NOA 2016= 99,301 - 43,664 = 55,637

NOA 2015 = 95035 - 42,400 = 52,635

NOA 2014 = 97269 - 41846 = 55423

NOA 2013 = 103477 - 40450 = 63027

35%

NOPAT 2016 = (50205-19945-9095-29-491) - [ 3,263 +(842* .35) ] = 17,087.3

NOPAT 2015 = (48538 - 21203-9046-224-509) - [ 3787 + [(1640) * .35] ]= 14343

NOPAT 2014 = (51585 - 21954 -8494-178) - [4240 + (396* .35)] =16580.40

NOPM 2016 = 17087.3/ 71890 = 23.77%

NOPM 2015 = 14343/ 70074 = 20.47%

NOPM 2014 = 16580.40 / 74,331 = 22.31%

NOAT 2016 = 71890 / (55637+52635/2) = 1.33

NOAT 2015 = 70074 / (52635 + 55423/2) = 1.30

NOAT 2014 = 74331 / (55423+63027/2) = 1.26

RNOA 2016 = .2377 * 1.33 = 31.61%

RNOA 2015 = .2047 * 1.30 = 26.61%

RNOA 2014 = .2231 * 1.26 = 28.11%

Merk

NOA 2016 = 69,620 - 30227 = 39393

NOA 2015 = 75211 - 30498 = 44713

NOA 2014 = 69101 - 28141 = 40960

NOA 2013 = 78,389 - 28259 = 50130

35%
NOPAT 2016= (39807-13891-9762-10124-651) - [718 + (720 *.35)] = 4409

NOPAT 2015= (39498-14934-10313-6704 -619) -[ 942 + (1527 *.35)] = 5451.55

NOPAT 2014= (42237-16768-11606-7180-1013) - [ 5349 + [(11613) *.35]] = 4385.55

NOPM 2016 = 4409/ 39807 = 11.08%

NOPM 2015 = 5451.55/ 39498 = 13.80%

NOPM 2014 = 4385.55 / 42237 = 10.38%

NOAT 2016 = 39807/ (39393+44713/2) = 0.947

NOAT 2015 = 39498/ (44713 + 40960/2) = 0.922

NOAT 2014 = 42237/ (40960+ 50130/2) = 0.927

RNOA 2016 = .1108 * 0.95 = 10.53%

RNOA 2015 = .1380 * 0.92 = 12.70%

RNOA 2014 = .1038 * 0.93 =9.65%

Question 4. Compare ROE and RNOA, identify the differences over time and comment on the differences in ROE and RNOA between the companies.

Question 5. Which company is more profitable? What is the trend over three years?

Question 6. What is the comparative position of operating and non-operating portion of ROE? What are the contributions of operating and non-operating activities to overall return to shareholders?

Note * ROE = Operating return (RNOA) + non-operating return (Flev*Spread)

Question 7. What is the comparative position of net operating profit margin? What is the trend over the three-year period? If major difference exists, what is the probable reason as the major line of business of the two companies overlaps?

Question 8. Are the companies' net asset turnover ratios similar or markedly different? Calculate and compare cash conversion cycle (CCC) for each year (2014, 2015 and 2016). What is your judgement on liquidity trend based on CCC?

Reference no: EM132487722

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