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 $ 16,779 $ 11,244 Short term investments 6,144 12,400 Accounts receivable (net) 8,894 11,095 Inventories 5,744 9,603 Other current assets 5,790 5,655 Current assets 43,351 49,997 Property, plant, and equipment (net) 15,542 23,983 Intangibles and other assets 19,518 72,843 Total assets $ 78,411 $ 146,823 Liabilities and Shareholders' Equity Accounts payable $ 7,126 $ 4,761 Short term notes 4,835 12,514 Other current liabilities 9,343 14,238 Current liabilities 21,304 31,513 Long term debt 4,955 7,755 Other long term liabilities 6,959 23,954 Total liabilities 33,218 63,222 Capital stock (par and additional paid in capital) 5,520 69,450 Retained earnings 48,683 47,062 Accumulated other comprehensive income (loss) (910 ) 275 Less Treasury stock and other equity adjustments (8,100 ) (33,186 ) Total shareholders' equity 45,193 83,601 Total liabilities and shareholders' equity $ 78,411 $ 146,823 Income Statements Net sales $ 50,422 $ 53,748 Cost of goods sold 14,192 11,848 Gross profit 36,230 41,900 Operating expenses 21,715 30,438 Other (income) expensenet (625 ) 3,850 Income before taxes 15,140 7,612 Tax expense 4,542 2,284 Net income $ 10,598 $ 5,328 Basic net income per share $ 3 22 $ 0 38 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 For both companies, compute the ratios below 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 ( ) 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

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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	$	16,779		$	11,244
Short-term investments		6,144			12,400
Accounts receivable (net)		8,894			11,095
Inventories		5,744			9,603
Other current assets		5,790			5,655
Current assets		43,351			49,997
Property, plant, and equipment (net)		15,542			23,983
Intangibles and other assets		19,518			72,843
Total assets	$	78,411		$	146,823
Liabilities and Shareholders' Equity:
Accounts payable	$	7,126		$	4,761
Short-term notes		4,835			12,514
Other current liabilities		9,343			14,238
Current liabilities		21,304			31,513
Long-term debt		4,955			7,755
Other long-term liabilities		6,959			23,954
Total liabilities		33,218			63,222
Capital stock (par and additional paid-in capital)		5,520			69,450
Retained earnings		48,683			47,062
Accumulated other comprehensive income (loss)		(910	)		275
Less: Treasury stock and other equity adjustments		(8,100	)		(33,186	)
Total shareholders' equity		45,193			83,601
Total liabilities and shareholders' equity	$	78,411		$	146,823
Income Statements
Net sales	$	50,422		$	53,748
Cost of goods sold		14,192			11,848
Gross profit		36,230			41,900
Operating expenses		21,715			30,438
Other (income) expensenet		(625	)		3,850
Income before taxes		15,140			7,612
Tax expense		4,542			2,284
Net income	$	10,598		$	5,328	*
Basic net income per share	$	3.22		$	0.38

* 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.

For both companies, compute the ratios below.

	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 (#.#)%		%		%

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?