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	$	5,377			$	1,520
Short-term investments		4,146				10,432
Accounts receivable (net)		6,574				8,775
Inventories		3,588				5,837
Other current assets		3,310				3,177
Current assets		22,995				29,741
Property, plant, and equipment (net)		9,846				18,287
Intangibles and other assets		15,422				68,747
Total assets	$	48,263			$	116,775
Liabilities and Shareholders' Equity:
Accounts payable	$	4,966			$	2,601
Short-term notes		1,139				8,818
Other current liabilities		7,343				12,238
Current liabilities		13,448				23,657
Long-term debt		2,955				5,755
Other long-term liabilities		4,991				21,986
Total liabilities		21,394				51,398
Capital stock (par and additional paid-in capital)		3,120				67,050
Retained earnings		30,503				29,382
Accumulated other comprehensive income (loss)		(590	)			195
Less: Treasury stock and other equity adjustments		(6,164	)			(31,250	)
Total shareholders' equity		26,869				65,377
Total liabilities and shareholders' equity	$	48,263			$	116,775
Income Statements
Net sales	$	41,862			$	45,188
Cost of goods sold		12,176				9,832
Gross profit		29,686				35,356
Operating expenses		19,763				28,486
Other (income) expensenet		(385	)			3,610
Income before taxes		10,308				3,260
Tax expense		3,111				1,621
Net income	$	7,197			$	1,639	*
Basic net income per share	$	2.42			$	0.22

*This is before income from discontinued operations.

Prepare the following ratios for both companies, and compare:

Accounts Receivables Turnover

Average Collection Period

Inventory Turnover

Average Days in Inventory

Profit Margin Ratio

Asset Turnover

Return on Assets

Return on Shareholders' Equity

.

Then answer the following questions:

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?