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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. ($ in millions, except per share amounts).

Balance Sheets ($ in millions, except per share data)
	J&J				Pfizer
Assets:
Cash	$	14,733			$	9,453
Short-term investments		5,775				12,031
Accounts receivable (net)		8,459				10,660
Inventories		5,336				8,865
Other current assets		5,325				5,190
Current assets		39,628				46,199
Property, plant, and equipment (net)		14,474				22,915
Intangibles and other assets		18,750				72,075
Total assets	$	72,852			$	141,189
Liabilities and Shareholders' Equity:
Accounts payable	$	6,721			$	4,356
Short-term notes		4,142				11,821
Other current liabilities		8,968				13,863
Current liabilities		19,831				30,040
Long-term debt		4,580				7,380
Other long-term liabilities		6,590				23,585
Total liabilities		31,001				61,005
Capital stock (par and additional paid-in capital)		5,070				69,000
Retained earnings		45,368				43,747
Accumulated other comprehensive income (loss)		(850	)			260
Less: Treasury stock and other equity adjustments		(7,737	)			(32,823	)
Total shareholders' equity		41,851				80,184
Total liabilities and shareholders' equity	$	72,852			$	141,189
Income Statements
Net sales	$	48,817			$	52,143
Cost of goods sold		13,814				11,470
Gross profit		35,003				40,673
Operating expenses		21,349				30,072
Other (income) expensenet		(580	)			3,805
Income before taxes		14,234				6,796
Tax expense		4,270				2,039
Net income	$	9,964			$	4,757	*
Basic net income per share	$	3.07			$	0.23

* 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.

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