Luther Corporation's Stock Price Is $39 Per Share and the Company

question 3

Multiple Choice

Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2009 is $23.4.If EBIT is 41.2 and tax rate is 35%,its Return on Invested Capital in 2009 is closest to:

• A)0.104
• B)0.064
• C)0.038
• D)0.068

---

Definitions:

Direct Write-off Method

An accounting method where uncollectible accounts receivable are directly written off against income at the time they are deemed non-collectable.

Allowance for Doubtful Accounts

An accounting provision representing the estimated portion of receivables that may not be collected.

Accounts Receivable

Represents money owed to a company by its customers for goods or services delivered but not yet paid for.

Bad Debt Expense

The cost associated with accounts receivable that a company is not able to collect from its debtors, recognized as an expense on the income statement.