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Financial Statement Analysis Case 2: Profitability Analysis of Johnson \& Johnson and Pfizer Inc. Pfizer Inc. is a U.S. company that manufactures and distributes pharmaceutical and consumer healthcare products that are similar to those sold by Johnson \& Johnson. In the following, we present Johusson \& Johnson's profitability ratios computed in Example 5B. 1 in the chapter appendix. Use these and the excerpts of P fizer's income statements to answer the following questions: a. If Johnson \& Johnson's sales are $71,890 million in 2016, which company is larger using sales as a measure of size? b. Compute Pfizer's profit margin in 2016 and 2015. c. Compute Pfizer's return on assets in 2016 and 2015. d. Compute Pfizer's retum on equity in 2016 and 2015. c. Compare Johnson \& Johnson's and Pfizer's profit margins in 2016 and 2015. f. Compare Johnson \& Johnson's and Pfizer's return on assets in 2016 and 2015. g. Compare Johnson \& Johnson's and Pfizer's return on equity in 2016 and 2015. Pfizer Inc. (all dollars in millions) Johnson \& Johnson (from Example 5B.1 in Appendix B) Sources: Johnson \& Johnson and Pfizer income statements 13 Profitability Measure 20162015 14 b. Pfizer's profit margin \begin{tabular}{l|l} 15 & Net Income \\ 16 & Sales \\ 17 & Profit Margin \\ 18 & \end{tabular} \begin{tabular}{|rr|rr|} \hline$ & 7,215 & $ & 6,960 \\ $ & 52,824 & $ & 48,851 \\ & 13.7% & & 14.3% \\ \hline & & & \\ \hline \end{tabular} c. Pfizer's return on assets Net Income Average Total Assets Return on Assets 24 Average Total Assets: Beginning Total Assets Ending Total Assets Subtotal Divide by Average Total Assets d. Pfizer's return on equity Net Income Average Stockholder's Equity Return on Equity Average Stockholder's Equity: Beginning Stockholder's Equity Ending Stockholder's Equity Subtotal Divide by Average Stockholder's Equity FSAC05-02.a FSAC05-02.b-d FSAC05-02.e-g

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