Stock Analysis on Net

Johnson & Johnson (NYSE:JNJ)

Financial Reporting Quality: Aggregate Accruals 

Microsoft Excel

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

Johnson & Johnson, balance sheet computation of aggregate accruals

US$ in millions

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Dec 29, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Operating Assets
Total assets 180,104 167,558 187,378 182,018 174,894
Less: Cash and cash equivalents 24,105 21,859 14,127 14,487 13,985
Less: Marketable securities 417 1,068 9,392 17,121 11,200
Operating assets 155,582 144,631 163,859 150,410 149,709
Operating Liabilities
Total liabilities 108,614 98,784 110,574 107,995 111,616
Less: Loans and notes payable 5,983 3,451 12,771 3,766 2,631
Less: Long-term debt, excluding current portion 30,651 25,881 26,888 29,985 32,635
Operating liabilities 71,980 69,452 70,915 74,244 76,350
 
Net operating assets1 83,602 75,179 92,944 76,166 73,359
Balance-sheet-based aggregate accruals2 8,423 (17,765) 16,778 2,807
Financial Ratio
Balance-sheet-based accruals ratio3 10.61% -21.13% 19.84% 3.75%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
AbbVie Inc. 13.10% -22.39% -14.27% -9.69%
Amgen Inc. -10.36% 57.08% 4.07% 0.70%
Bristol-Myers Squibb Co. -3.21% -7.12% -3.86% -13.40%
Danaher Corp. -3.94% 3.48% -1.55% 16.41%
Eli Lilly & Co. 29.18% 28.84% 11.38% 16.60%
Gilead Sciences Inc. -11.79% 1.04% -2.92% -2.34%
Merck & Co. Inc. 6.20% 3.16% 0.46% 25.14%
Pfizer Inc. -11.48% 30.66% 24.95% -7.11%
Regeneron Pharmaceuticals Inc. 25.51% 1.17% 11.07% 43.54%
Thermo Fisher Scientific Inc. 2.28% 4.96% -1.78% 43.38%
Vertex Pharmaceuticals Inc. 42.13% 61.24% 14.07% 18.20%
Balance-Sheet-Based Accruals Ratio, Sector
Pharmaceuticals, Biotechnology & Life Sciences 1.64% 7.36% 4.84% 6.18%
Balance-Sheet-Based Accruals Ratio, Industry
Health Care 4.65% 8.13% 2.80% 4.68%

Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= 155,58271,980 = 83,602

2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= 83,60275,179 = 8,423

3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 8,423 ÷ [(83,602 + 75,179) ÷ 2] = 10.61%

4 Click competitor name to see calculations.

Financial ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, Johnson & Johnson improved earnings quality from 2023 to 2024.

Cash-Flow-Statement-Based Accruals Ratio

Johnson & Johnson, cash flow statement computation of aggregate accruals

US$ in millions

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Dec 29, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net earnings 14,066 35,153 17,941 20,878 14,714
Less: Net cash flows from operating activities 24,266 22,791 21,194 23,410 23,536
Less: Net cash (used by) from investing activities (18,599) 878 (12,371) (8,683) (20,825)
Cash-flow-statement-based aggregate accruals 8,399 11,484 9,118 6,151 12,003
Financial Ratio
Cash-flow-statement-based accruals ratio1 10.58% 13.66% 10.78% 8.23%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
AbbVie Inc. 10.32% -24.89% -16.25% -10.28%
Amgen Inc. -11.16% 52.47% 8.81% -12.87%
Bristol-Myers Squibb Co. -4.97% -5.99% -9.10% -12.73%
Danaher Corp. -1.25% 8.20% 1.44% 18.48%
Eli Lilly & Co. 28.52% 28.13% 10.32% 5.30%
Gilead Sciences Inc. -18.05% -0.19% -4.95% -4.86%
Merck & Co. Inc. 5.00% 2.23% 0.61% 29.09%
Pfizer Inc. -5.24% 19.96% 18.46% 13.18%
Regeneron Pharmaceuticals Inc. 12.04% 14.35% 18.61% 49.24%
Thermo Fisher Scientific Inc. 4.71% 3.80% -0.06% 34.69%
Vertex Pharmaceuticals Inc. 43.34% 62.03% -14.45% 1.38%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Pharmaceuticals, Biotechnology & Life Sciences 2.07% 9.68% 2.52% 8.19%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Health Care 3.21% 8.44% 2.38% 5.78%

Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 8,399 ÷ [(83,602 + 75,179) ÷ 2] = 10.58%

2 Click competitor name to see calculations.

Financial ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, Johnson & Johnson improved earnings quality from 2023 to 2024.