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GuruFocus has detected 4 Warning Signs with Johnson & Johnson \$JNJ.
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Johnson & Johnson (NYSE:JNJ)
Accounts Receivable
\$11,798 Mil (As of Sep. 2016)

Accounts Receivable are created when a customer has received a product but has not yet paid for that product. Johnson & Johnson's accounts receivables for the quarter that ended in Sep. 2016 was \$11,798 Mil.

Accounts receivable can be measured by Days Sales Outstanding. Johnson & Johnson's Days Sales Outstanding for the quarter that ended in Sep. 2016 was 60.41.

In Ben Grahams calculation of liquidation value, accounts receivable are only considered to be worth 75% of book value. Johnson & Johnson's Liquidation Value for the quarter that ended in Sep. 2016 was \$-14,075 Mil.

Definition

Accounts Receivable is money owed to a business by customers and shown on its Balance Sheet as an asset.

Explanation

1. Accounts Receivable are created when a customer has received a product but has not yet paid for that product. Days sales outstanding measures of the average number of days that a company takes to collect revenue after a sale has been made. It is a financial ratio that illustrates how well a company's accounts receivables are being managed.

Johnson & Johnson's Days Sales Outstanding for the quarter that ended in Sep. 2016 is calculated as:

 Days Sales Outstanding = Account Receivable / Revenue * Days in Period = 11798 / 17820 * 91 = 60.41

2. In Ben Grahams calculation of liquidation value, Johnson & Johnson's accounts receivable are only considered to be worth 75% of book value:

Johnson & Johnson's liquidation value for the quarter that ended in Sep. 2016 is calculated as:

 Liquidation value = Cash and Cash Equivalents - Total Liabilities + (0.75 * Account Receivable) + (0.5 * Inventory) = 40433 - 67600 + 0.75 * 11798 + 0.5 * 8488 = -14,075

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Be Aware

Net receivables tells us a great deal about the different competitors in the same industry. In competitive industries, some attempt to gain advantage by offering better credit terms, causing increase in sales and receivables.

If company consistently shows lower % Net receivables to gross sales than competitors, then it usually has some kind of competitive advantage which requires further digging.

Average Days Sales Outstanding is a good indicator for measuring a companys sales channel and customers. A company may book great revenue and earnings growth but never receive payment from their customers. This may force a write-off in the future and depress future earnings.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Johnson & Johnson Annual Data

 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Accts Rec. 8,712 9,444 9,719 9,646 9,774 10,581 11,309 11,713 10,985 10,734

Johnson & Johnson Quarterly Data

 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Accts Rec. 12,257 11,615 10,985 11,533 11,968 11,366 10,734 11,406 12,062 11,798
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