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Intermediate Accounting II- Week 6- Project 2

Intermediate Accounting II- Week 6- Project 2 - improving...

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February 15, 2010 Week 5 Project International Reporting Case A.) 1.) Return on Assets $58,233 / $648,020 = 9% 2.) Return on stockholders equity $58,333 / $176,413 = 33% 3.) debt to assets ratio $1,228,313 / $648,020 = 1.89% B.) ROA is a measure of profitability or effectiveness of resource usage calculated by expressing a company’s net income as a percentage of total assets. As for Sepracor, its ROA is 9%. This means that Sepracor created 9 cents of earnings from each dollar of assets. The ROE for Sepracor is 33%, which means that 33 cents of assets are created for each dollar that was originally invested. It measure how Sepracor is using its money. The higher the return on equity, the more funds available to be invested in
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Unformatted text preview: improving business operations without having to invest more capital. Debt to asset ratio measures the company’s solvency, and the higher the ratio, the lower the borrowing capacity for the company. I would make an investment in the company’s 5% convertible bonds. Sepracor’s ROA and ROE is above the average and showing that it is profitable; however, the company’s debt to asset ratio is above 1, which means that most of its assets are financed through debt instead of equity. Sepracor would be in trouble if its creditors were to start demanding repayment. C.) To make valid comparisons between Sepracor and Bayer, you would have to compare the rules for fair value under the U.S GAAP and iGAAP....
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