E2-42. Compare Income Statements and Balance Sheets of Competitors Following are selected income statement and balance sheet data from two pharmaceutical companies, Pfizer and Dr. Reddy's, for their respective 2018 fiscal years. Pfizer Income Statement (s millions) Sales....... Cost of goods sold .. Gross profit. ... Total expenses. Net income.. $53,647 11,248 42,399 31,211 $11,188 Dr. Reddy's $2,181 1,009 1,172 1,021 $ 151 Pfizer Dr. Reddy's $ 49,926 109,496 $159,422 $1,684 1,781 3,465 Balance Sheet ($ millions) Current assets ... Long-term assets Total assets ... Current liabilities. . Long-term liabilities. Total liabilities. ... Stockholders' equity. Total liabilities and equity.. $ 31,858 63,806 $1,070 453 95,664 63,758 1,523 1,942 $159,422 $3,465 a. Express each income statement amount as a percentage of sales. Comment on any differences ob- served between the two companies, especially as they relate to their respective business models. (Hint: Pfizer's gross profit as a percentage of sales is considerably higher than Dr. Reddy's. What aspect of Pfizer's business do we believe is driving its profitability?) b. Express each balance sheet amount as a percentage of total assets. Comment on any differences ob- served between the two companies. Pfizer has chosen to structure itself with a lower proportion of equity (and a higher proportion of debt) than Dr. Reddy's. How does this capital structure decision affect our evaluation of the relative riskiness of these two companies