The Table also provides financial indicators for the chemical and related products industry (Chemicals and Allied Products) for the year 2018. This will allow you to compare the performance of both firms J & J and Merck with the industry in which they compete for the same year. Do you understand that the performance of firms is superior to the average performance of their competitors in the market? Justify your answer. What adjustments or changes would you recommend to make each of the firms more attractive to shareholders and others interested in them? Justify your answer. Company Name: Year 2018 Chemicals and Allied Products Industry Ratios ………….. Solvency or Debt Ratios Merck J&J 2018 Debt ratio 0.67 0.61 0.47 Debt-to-equity ratio 0.93 0.51 0.38 Interest coverage ratio 12.27 18.91 -9.43 Liquidity Ratios Current ratio 1.17 1.47 3.47 Quick ratio 0.92 1.16 2.12 Cash ratio 0.40 0.63 2.24 Profitability Ratios Profit margin 14.64% 18.75% -93.4% ROE (Return on equity), after tax 23.03% 25.60% -248.5 ROA (Return on assets) 7.49% 10.00% -146.5 Gross margin 68.06% 66.79% 55.3% Operating margin (Return on sales) 19.62% 24.27% -42.9% Activity or Efficiency Ratios Asset turnover 0.51 0.53 1.08 Receivables turnover (days) 61.02 63 16 Inventory turnover (days) 146.98 129 36 Price Ratios Dividend Payout Ratio 0.84 0.62 0.15
The Table also provides financial indicators for the chemical and related products industry (Chemicals and Allied Products) for the year 2018. This will allow you to compare the performance of both firms J & J and Merck with the industry in which they compete for the same year.
- Do you understand that the performance of firms is superior to the average performance of their competitors in the market? Justify your answer.
- What adjustments or changes would you recommend to make each of the firms more attractive to shareholders and others interested in them? Justify your answer.
|
Company Name: |
Year 2018 |
Chemicals and Allied Products Industry Ratios |
|
|
………….. |
|||
|
Solvency or Debt Ratios |
Merck |
J&J |
2018 |
|
Debt ratio |
0.67 |
0.61 |
0.47 |
|
Debt-to-equity ratio |
0.93 |
0.51 |
0.38 |
|
Interest coverage ratio |
12.27 |
18.91 |
-9.43 |
|
Liquidity Ratios |
|
|
|
|
Current ratio |
1.17 |
1.47 |
3.47 |
|
Quick ratio |
0.92 |
1.16 |
2.12 |
|
Cash ratio |
0.40 |
0.63 |
2.24 |
|
Profitability Ratios |
|
|
|
|
Profit margin |
14.64% |
18.75% |
-93.4% |
|
ROE ( |
23.03% |
25.60% |
-248.5 |
|
ROA ( |
7.49% |
10.00% |
-146.5 |
|
Gross margin |
68.06% |
66.79% |
55.3% |
|
Operating margin (Return on sales) |
19.62% |
24.27% |
-42.9% |
|
Activity or Efficiency Ratios |
|
|
|
|
Asset turnover |
0.51 |
0.53 |
1.08 |
|
Receivables turnover (days) |
61.02 |
63 |
16 |
|
Inventory turnover (days) |
146.98 |
129 |
36 |
|
Price Ratios |
|
|
|
|
Dividend Payout Ratio |
0.84 |
0.62 |
0.15 |
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