Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018

question 10

Multiple Choice

Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018 (in $ millions)

-Refer to the balance sheet above. If in 2017, Luther has 5.2 million shares outstanding and these shares are trading at $16 per share, then using the market value of equity, the debt-equity ratio for Luther in 2017 is closest to:

• A)2.71
• B)2.61
• C)2.59
• D)2.55

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Definitions:

Allowance Method

A method in accounting that involves estimating the accounts that are uncollectible at the end of each period to account for bad debts.

Receivables

Amounts owed to a company by customers or other parties as a result of the company providing goods or services on credit.

Bankruptcy

A judicial process concerning an individual or enterprise that cannot fulfill its debt obligations.

Service Contract

A formal agreement between a service provider and a client, detailing the terms of service to be rendered.