Evaluate and compare the two companies by responding to the following questions.

Note:Because two-year comparative statements are not provided, you should use year-end balances in place of average balances as appropriate.

1.Which of the two companies appears more efficient in collecting its accounts receivable and managing its inventory?

2.Which of the two firms had greater earnings relative to resources available?

3.Have the two companies achieved their respective rates of return on assets with similar combinations of profit margin and turnover?

4.From the perspective of a common shareholder, which of the two firms provided a greater rate of return?

5.From the perspective of a common shareholder, which of the two firms appears to be using leverage more effectively to provide a return to shareholders above the rate of return on assets?

Balance Sheets

($ in millons, except per share data)

J&J Pfizer

Assets:

Cash 5,377 1,520

Short-term investments 4,146 10,432

Accounts receivable (net) 6,574 8,775

Inventoies 3,588 5,837

Other current assets 3,310 3,177

Current assets 22,995 29,741

Property,plant and equip. (net) 9,846 18,287

Intangibles and other assets 15,422 68,747

TOTAL ASSETS $48,263 $116,775

Liabilities and shareholders' equity

Accounts payable 4,966 2,601

Short term notes 1,139 8,818

Other Current liabilities 7,343 12,238

Current liabilities 13,448 23,657

Long term debt 2,955 5,755

Other long term liabilities 4,991 21,986

Total Liabilities 21,394 51,398

Capital stock (par and

additional paid in capital) 3,120 67,050

Retained earnings 30,503 29,382

Accumulated other

comprehensive income (loss) (590) 195

Less: Treasury stock and other

equity adjustments (6,164) (31,250)

Total Shareholders' equity 26,869 65,377

Total liabilities and

Shareholders' equity $48,263 $116,775

Net Income Statements

Net sales $41,862 $45,188

Cost of goods sold 12,176 9,832

Gross profit 29,686 35,356

Operating expenses 19,763 28,486

Other (income) expense net (385) 3,610

Income before taxes 10,308 3,260

Tax expense 3,111 1,621

Net Income 7,197 1,639 *

Basic net income per share 2.42 .22

*this is before income from discontinued operations