Analysis and Interpretation of Financial Statements of Bayer Ag and Johnson & Johnson

Table of Contents

I. Introduction        

II. Company Background        

1. Bayer AG        

2. Johnson and Johnson        

III. Vertical and Horizontal Analysis        

1.1 Bayer AG        

1.1.1 Consolidated Income Statement        

1.1.2 Consolidated Balance Sheet        

1.2.1 Consolidated Income Statement        

1.2.2 Consolidated Balance Sheet        

IV. Ratio Analysis        

1. Profitability        

2. Efficiency        

2.1 Asset turnover        

2.2 Average trade receivables collection period        

2.3 Average Payables Payment Period (Days)        

3. Solvency        

4. Capital Structure        

5. Investor        

V. Limitation        

VI. Recommendation and Conclusion        

VII. References        

VIII. Appendixes        

1.1 Bayer AG        

2. Accounting Ratio Formulas        

3. Ratio Calculations        

3.1 Bayer AG (€ million)        

4. Group Contribution        

I. Introduction

This report will focus on Bayer AG and Johnson and Johnson plc to analysis both companies’ financial performance. Firstly, by understanding background of each corporation, this paper will provide brief background information, highlighting important data and business. In depth, vertical and horizontal analysis will be employed to analyze companies’ financial performance. In addition, by critical examine annual report of each company; this report will adopts ratios to give reader a comprehensive view regarding to financial performance. Based on these assessments, this paper will combine analysis and background of each company to make justification regarding to investment following a financial perspective.

II. Company Background

1. Bayer AG

Bayer AG was founded in 1863 with primary business of acetylsalicylic acid. Currently, as a global enterprise, there are about 118,900 employees with more than 42.2 billion Euros (30.7 billion Pound) sales volume in 2014. Bayer’s business operation focuses on health care, agriculture and high-tech polymer material with headquarter in Leverkusen, Germany (Bayer: Science for a better life 2015). There are more than 5,000 products with core competence in health care. In addition, Bayer has 2.5 billion Euros (1.82 Billion Pound) for capital expenditure to support its global operation (Bayer 2014). Bayer also pays great attention on its research and development to build competitive advantages with 3.6 billion Euros (2.62 Billion Pound) research expenditure in 2014. Furthermore, Bayer combines its business operation with service into three service companies, which are Bayer Business Service, Bayer Technology Service and Currenta, to provide quality service to its consumer. Finally, as its headquarter is in Germany, Bayer’s core business focuses on European countries, while there is an increasing demand in Asia/Pacific as well. Bayer also does well in North America and Latin America, developing its business in Africa and Middle East for future challenge (Bayer: Science for a better life 2015).