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

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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. ($

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?