International Reporting Case

Sepracor, Inc.
(a) Sepracor, Inc. computed ratios

Sepracor, Inc., is a U.S. drug company,that prepares its financial statements in accordance with U.S. GAAP.
(1) Return on Assets Ratios
Net Income: 58,333 Total Assets: 1,228,313 176,413 4.15%
(2) Return on Stockholders' Equity
Net Income: 58,333 Stockholders' Equity: 176,413 33.07%
(3) Debt to Assets Ratio
Total Debt: 648,020 554,114 Total Assets: 1,228,313 176,413 85.58%

(b) Operating Performance & Financial Position of Sepracor's Inc.:

Based on the operating performance and financial position of Sepracor, Inc.in which the ratios are ROA 3.5%;
Return on Stockholders' Equity 16%; and Debt to Assets 75%; in 2007 this analysis would appear that Spracor's R
are above the industry average, and that the Debt to Assets is very high according to compared ratois in the industr
it is a riskier investment and may require a higher rate of return than the 5% coupon. Investors may have likely w
the convertible bonds due to the possibility that Sepracor’s stock price will increase, and they can cash in on these
convert to common stock.
Debt to Assets Ratio:
It measures how much money a company should safely be able to borrow over long periods of time. It does this b
company's total debt (including short term and long term obligations) and dividing it by the amount of owner's equ
The result you get after dividing debt by equity is the percentage of the company that is indebted (or "leveraged").
The normal level of debt to equity can change over time, and depends on both economic factors and society's gener
towards credit. Generally, any company that has a debt to equity ratio of over 40 to 50% should be looked at more
sure there are no liquidity problems. If you find the company's working capital, and current / quick ratios drasticall
of serious financial weakness.

( c)
Comparing Sepracor to Bayer:

Under IFRS, the debt and equity components of a convertible bond are separately recorded as liabilities and st
Assuming an equity component of $150,000, for the Sepracor bonds, caused a change in the analysis. And in co
which had convertible bonds, would allocate the bond amount between debt and equity, and the same would be d
Sepracor to make their ratios comparable.

Reclassified:
Account 2007
Current Liabilities 554,114
Convertible Debt 498,020
Total Liabilities 1,078,313
Stockholders’ Equity 326,413
Net Income 58,333

Ratios: Comparsions

(1) Return on Assets Ratios

Net Income: 58,333 Total Assets: 1,228,313 176,413 4.15%
(2) Return on Stockholders' Equity
Net Income: 58,333 Stockholders' Equity: 326,413 17.87%
(3) Debt to Assets Ratio
Total Debt: 498,020 554,114 Total Assets: 1,078,313 326,413 74.90%

By adjusting Sepracor 2007 reporting information by $150,000 ; it has resulted in reporting a higher level of St
less debt. And eventhough; Sepracor Inc. has the same ROA;it lower their ROSE, the debt to assets ratio is now
with the industry level. Sepracor Inc. is now less risky for investors.
ance with U.S. GAAP.
Ratios
4.15%

33.07%

85.58%

he ratios are ROA 3.5%;

d appear that Spracor's ROA and ROSE
pared ratois in the industry. This may suggest
estors may have likely were attracted to
they can cash in on these gains when they

ds of time. It does this by comparing the

he amount of owner's equity.
debted (or "leveraged").
actors and society's general feeling
hould be looked at more carefully to make
nt / quick ratios drastically low, this is a sign

corded as liabilities and stockholders’ equity.

n the analysis. And in comparing it to Bayer;
, and the same would be done for
 Ratios
4.15%

17.87%

74.90%

orting a higher level of Stockholders' Equity and

ebt to assets ratio is now in right standards