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 $ 8,195 $ 3,980 Short term investments 4,668 10,924 Accounts receivable (net) 7,154 9,355 Inventories 4,112 6,751 Other current assets 3,930 3,795 Current assets 28,059 34,805 Property, plant, and equipment (net) 11,270 19,711 Intangibles and other assets 16,446 69,771 Total assets $ 55,775 $ 124,287 Liabilities and Shareholders' Equity Accounts payable $ 5,506 $ 3,141 Short term notes 2,063 9,742 Other current liabilities 7,843 12,738 Current liabilities 15,412 25,621 Long term debt 3,455 6,255 Other long term liabilities 5,483 22,478 Total liabilities 24,350 54,354 Capital stock (par and additional paid in capital) 3,720 67,650 Retained earnings 35,023 33,802 Accumulated other comprehensive income (loss) (670 ) 215 Less Treasury stock and other equity adjustments (6,648 ) (31,734 ) Total shareholders' equity 31,425 69,933 Total liabilities and shareholders' equity $ 55,775 $ 124,287 Income Statements Net sales $ 44,002 $ 47,328 Cost of goods sold 12,680 10,336 Gross profit 31,322 36,992 Operating expenses 20,251 28,974 Other (income) expensenet (445 ) 3,670 Income before taxes 11,516 4,348 Tax expense 3,455 1,304 Net income $ 8,061 $ 3,044 Basic net income per share $ 2 62 $ 0 42 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	$	8,195		$	3,980
Short-term investments		4,668			10,924
Accounts receivable (net)		7,154			9,355
Inventories		4,112			6,751
Other current assets		3,930			3,795
Current assets		28,059			34,805
Property, plant, and equipment (net)		11,270			19,711
Intangibles and other assets		16,446			69,771
Total assets	$	55,775		$	124,287
Liabilities and Shareholders' Equity:
Accounts payable	$	5,506		$	3,141
Short-term notes		2,063			9,742
Other current liabilities		7,843			12,738
Current liabilities		15,412			25,621
Long-term debt		3,455			6,255
Other long-term liabilities		5,483			22,478
Total liabilities		24,350			54,354
Capital stock (par and additional paid-in capital)		3,720			67,650
Retained earnings		35,023			33,802
Accumulated other comprehensive income (loss)		(670	)		215
Less: Treasury stock and other equity adjustments		(6,648	)		(31,734	)
Total shareholders' equity		31,425			69,933
Total liabilities and shareholders' equity	$	55,775		$	124,287
Income Statements
Net sales	$	44,002		$	47,328
Cost of goods sold		12,680			10,336
Gross profit		31,322			36,992
Operating expenses		20,251			28,974
Other (income) expensenet		(445	)		3,670
Income before taxes		11,516			4,348
Tax expense		3,455			1,304
Net income	$	8,061		$	3,044	*
Basic net income per share	$	2.62		$	0.42

* 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?