Presented below are condensed financial statements adapted from those of two actual companies competing in the pharmaceutical industryJohnson and Johnson (J&J) and Pfizer, Inc. ($ in millions, except per share amounts).

Balance Sheets ($ in millions, except per share data)
	J&J				Pfizer
Assets:
Cash	$	7,713			$	3,363
Short-term investments		4,545				10,801
Accounts receivable (net)		7,009				9,210
Inventories		3,976				6,525
Other current assets		3,775				3,640
Current assets		27,018				33,539
Property, plant, and equipment (net)		10,914				19,355
Intangibles and other assets		16,190				69,515
Total assets	$	54,122			$	122,409
Liabilities and Shareholders' Equity:
Accounts payable	$	5,371			$	3,006
Short-term notes		1,832				9,511
Other current liabilities		7,718				12,613
Current liabilities		14,921				25,130
Long-term debt		3,330				6,130
Other long-term liabilities		5,360				22,355
Total liabilities		23,611				53,615
Capital stock (par and additional paid-in capital)		3,570				67,500
Retained earnings		34,118				32,697
Accumulated other comprehensive income (loss)		(650	)			210
Less: Treasury stock and other equity adjustments		(6,527	)			(31,613	)
Total shareholders' equity		30,511				68,794
Total liabilities and shareholders' equity	$	54,122			$	122,409
Income Statements
Net sales	$	43,467			$	46,793
Cost of goods sold		12,554				10,210
Gross profit		30,913				36,583
Operating expenses		20,129				28,852
Other (income) expensenet		(430	)			3,655
Income before taxes		11,214				4,076
Tax expense		3,364				1,223
Net income	$	7,850			$	2,853	*
Basic net income per share	$	2.57			$	0.37

* 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.

	J&J		Pfizer
Receivables Turnover (#.##)		times		times
Average Collection Period (#)		days		days
Inventory Turnover (#.##)		times		times
Average Days in Inventory (#)		days		days
Profit Margin (#.##)%		%		%
Asset Turnover (#.###)		times		times
Return on Assets (#.#)%		%		%
Equity Multiplier (#.##)
Return on Shareholders' Equity (#.#)%		%		%

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?