Each business day, on average, a company writes checks totaling $12,700 to pay its suppliers. The...

Each business day, on average, a company writes checks totaling $12,700 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling $23,700. The cash from the payments is available to the firm after two days.

a.	Calculate the company’s disbursement float, collection float, and net float.
b.	If the collected funds were available in one day instead of two, what would be the company's disbursement float, collection float, and net float?

a.	Disbursement float
	Collection float
	Net float
b.	Disbursement float
	Collection float
	Net float

Expert Solution

a.
Disbursement float	No of days to clear checks*Value of check written
Disbursement float	4*12700
Disbursement float	$50,800

Collection float	No of days in cash available*Value of collection
Collection float	2*23700
Collection float	$47,400

Net float	Disbursement float - Collection float
Net float	50800-47400
Net float	$3,400

b.
Disbursement float	No of days to clear checks*Value of check written
Disbursement float	4*12700
Disbursement float	$50,800

Collection float	No of days in cash available*Value of collection
Collection float	1*23700
Collection float	$23,700

Net float	Disbursement float - Collection float
Net float	50800-23700
Net float	$27,100

jeff jeffy answered 1 month ago

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