my 4 Presented below are condensed financial statements adapted from those of two actual companies competing in the pharmaceutical industry-Johnson and Johnson (J&J) and Pfizer, Inc. ($ in millions except per share amounts) 2.5 Balance Sheets polnts ($ in millions, except per share data) J&J Pfizer Assets: $ 7,035 11,539 10,080 7,911 4,570 Cash $12,005 5,283 Short-term investments ook Accounts receivable (net) 7,879 4,792 4,705 Inventories Other current assets 34,664 13,050 17,726 Current assets 41,135 21,491 71,051 Print Property, plant, and equipment (net) Intangibles and other assets $65,440 Total assets $133,677 Liabilities and Shareholders' Equity: Accounts pay able 3,816 6,181 3,218 8,468 Short-term notes 10,897 Other current liabilities 13,363 28,076 6,880 Current liabilities 17,867 4,080 6,098 Long-term debt Other long-term liabilities 23,093 Total liabilities 28,045 58,049 Capital stock (par and additional paid-in capital) Retained earnings Accumulated other comprehensive income (loss Less: Treasury stock and other equity adjustments Total shareholders' equity 4,470 40,948 (770) (7,253) 68,400 39,327 240 (32,339) 37,395 75,628 $65,440 $133,677 Total liabilities and shareholders' equity Income Statements Net sales $46,677 13,310 50,003 Cost of goods sold Gross profit Operating expenses Other (income) expense-net 10,966 39,037 29,584 3,745 33,367 20,861 (520) 13,026 3,908 9,118 Income before taxes 5,708 1,712 $ 3,996* x expense Net income Basic net income per share 2.87 0.67 This is before income from discontinued operations. 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. Required: 1. For both companies, compute the ratios below. 2. Evaluate and compare the two companies. Complete this question by entering your answers in the tabs below. Required 1 Required 2 For both companies, compute the ratios below. J&J Pfizer Receivables Turnover (###) Average Collection Period (#) Inventory Turnover (##) |Average Days in Inventory (#) Profit Margin (###)% Asset Turnover (#: ###) Return on Assets (##)% Equity Multiplier (###) Return on Shareholders' Equity ##)% times times days times days days times days % % times times % % % Required 2 Required 1 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Evaluate and compare the two companies. Analysis Which of the two companies appears more efficient in collecting its accounts receivable and managing its inventory? Which of the two firms had greater earnings relative to resources available? Have the two companies achieved their respective rates of return on assets with similar combinations of profit margin and turnover? From the perspective of a common shareholder, which of the two firms provided a greater rate of return? 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? Required 1 Required 2
