Each business day, on average, a company writes checks totaling $12,700 to pay i

Question

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.

Calculate the company

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.

Explanation / Answer

a>Disbursement Float=Amount*Clearing Time=12700*4 50800 Collection Float w.r.t Disbursement float=23700*(4/2) 47400 Net Float=47400-50800 -3400 b>Disbursement Float=Amount*Clearing Time=12700*4 50800 Collection Float w.r.t Disbursement float=23700*(4/1) 94800 Net Float=94800-50800 44000

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