Question

Presented below are condensed financial statements adapted from those of two actual companies competing in the pharmaceutical industry—Benatar and Jett, Inc. ($ in millions, except per share amounts).

Balance Sheets ($ in millions, except per share data)
	Benatar				Jett
Assets:
Cash	$	18,143			$	12,398
Short-term investments		6,390				12,646
Accounts receivable (net)		9,184				11,385
Inventory		6,016				10,135
Other current assets		6,100				5,965
Current assets		45,833				52,529
Property, plant, and equipment (net)		16,254				24,695
Intangibles and other assets		20,030				73,355
Total assets	$	82,117			$	150,579
Liabilities and Shareholders' Equity:
Accounts payable	$	7,396			$	5,031
Short-term notes		5,297				12,976
Other current liabilities		9,593				14,488
Current liabilities		22,286				32,495
Long-term debt		5,205				8,005
Other long-term liabilities		7,205				24,200
Total liabilities		34,696				64,700
Common stock (par and additional paid-in capital)		5,820				69,750
Retained earnings		50,893				49,272
Accumulated other comprehensive income (loss)		(950	)			285
Less: Treasury stock and other equity adjustments		(8,342	)			(33,428	)
Total shareholders' equity		47,421				85,879
Total liabilities and shareholders' equity	$	82,117			$	150,579
Income Statements
Net sales	$	51,492			$	54,818
Cost of goods sold		14,444				12,100
Gross profit		37,048				42,718
Operating expenses		21,959				30,682
Other (income) expense—net		(655	)			3,880
Income before taxes		15,744				8,156
Income tax expense		4,723				2,447
Net income	$	11,021			$	5,709	*
Basic net income per share	$	3.32			$	0.48

* 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. (Consider 365 days a year. Do not round intermediate calculations. Round "Asset Turnover" answers to 3 decimal places and other final answers to 2 decimal places.)

Benatar		Jett
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 Equity		%		%

Answer 1

Solution:

Summary: