User Account

All Pages

Compute the return on stockholders equity

Assignment Help Accounting Basics
Reference no: EM131830011

Case - Sepracor, Inc.

Sepracor, Inc., a drug company, reported the following information. The company prepares its financial statements in accordance with GAAP.

2007 (,000)

Current liabilities $ 554,114

Convertible subordinated debt 648,020

Total liabilities 1,228,313

Stockholders' equity 176,413

Net income 58,333

Analysts attempting to compare Sepracor to drug companies that issue debt with detachable warrants may face a challenge due to differences in accounting for convertible debt.

Instructions -

(a) Compute the following ratios for Sepracor, Inc. (Assume that year-end balances approximate annual averages.)

(1) Return on assets.

(2) Return on stockholders' equity.

(3) Debt to assets ratio.

(b) Briefly discuss the operating performance and financial position of Sepracor. Industry averages for these ratios in 2007 were: ROA 3.5%; return on equity 16%; and debt to assets 75%. Based on this analysis, would you make an investment in the company's 5% convertible bonds? Explain.

(c) Assume you want to compare Sepracor to an IFRS company like Merck (which issues nonconvertible debt with detachable warrants). Assuming that the fair value of the equity component of Sepracor's convertible bonds is $150,000, how would you adjust the analysis above to make valid comparisons between Sepracor and Merck?

Reference no: EM131830011

Questions Cloud

Provide a historic summary of where the star ratings system : Provide a historic summary of where the star ratings system evolved from, as well as a brief history of how Tripadvisor came about.
Determine the negative effects on an investigation : Justify the necessity of validating data acquisition and determine the negative effects on an investigation if this step is not performed.
Possible tax implications when selling fixed asset : For which values of marginal tax rates would you prefer to buy the municipal bond? Describe the possible tax implications when selling a fixed asset.
Standard error of the mean calculated : When constructing a confidence interval for the mean with s known, how is the standard error of the mean calculated?
Compute the return on stockholders equity : Sepracor, Inc., a drug company, reported the following information. Compute the Return on stockholders equity
How is the standard error of the mean estimated : When constructing a confidence interval for the mean with s unknown, how is the standard error of the mean estimated?
Particular school district reveals a mean score : A sample of 400 students throughout a particular school district reveals a mean score of 498. Estimate the mean score for all the students in the district
Identify potential legislative responses associated : Identify potential legislative responses associated with your selected course of action, e.g., any proposed legislation introduced by any members.
Mean for the verbal component of the sat : The mean for the verbal component of the SAT is reported as 500, with a standard deviation (s) of 100.

Reviews

Write a Review

Accounting Basics Questions & Answers

  To differentiate the variable and fixed costs in the use of

the following are monthly totals taken from the log of laser printer used by the hardcopy printing international. cost

  Given the following information how much was transferred to

1. managerial accountinga. focuses primarily on reporting to regulatory agenciesb. is governed by generally accepted

  Predict the sales for using the moving average method

The Schonlind Company has gathered information regarding past sales: Predict the sales for 2006 using the moving average method

  Prepare a balance sheet

prepare a Balance Sheet, given details attached below,  Acid Test Ratio : 2.5,  Current Ratio : 1.5, Net working capital Rs. 10, 00,000, Fixed Assets ?, Share holders fund Rs. 15, 00,000, Stock\ Inventory ?

  Prepare the journal entry to record the exchange

Sarasota Company traded a used welding machine (cost $11,520, accumulated depreciation $3,840) for office equipment with an estimated fair value of $6,400. Sarasota also paid $3,840 cash in the transaction. Prepare the journal entry to record the e..

  At december 31 depaul corporation had a 16 million balance

at december 31 depaul corporation had a 16 million balance in its deferred tax asset account and a 68 million balance

  Compute the estimated overhead costs for cookies

The activity-cost-driver for the oven would be 220,000/1500=146.67. Remember the product cost will consist of direct material, direct labor, and overhead.

  Discuss in three pages how the image of islam gradually

Discuss in three pages how the image of Islam gradually changes among the elites in western-Europe. You can talk about Maxime Rodinson.

  Discuss says expected net realizable value of accounts

says expected net realizable value of accounts receivable as of December 31

  Item 18 method is appropriate when the service life of the

depreciation for partial periodslightning delivery company purchased a new delivery truck for 45000 on april 1 2013.

  Prepare all appropriate journal entries related to the

as a long-term investment at the beginning of the fiscal year florists international purchased 30 of nursery supplies

  Find the year-end balances in the related pension accounts

(Basic Pension Worksheet) The following facts apply to the pension plan of Boudreau Inc. for the year 2014.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd