The Essex Company found that an average of 10 days elapses between when customer

Question

The Essex Company found that an average of 10 days elapses between when customer payments are received and the deposited funds clear the customer's bank and become usable by the firm. Essex's annual sales are $240 million. (Assume 365 days per year when converting from annual data to daily data or vice versa.) What is the increase in Essex's average cash balance assuming that it can reduce the time required to process customer payments by 3 days through more efficient payment processing methods?

$666,667

$120,000,000

$1,972,603

$270,000

$666,667

$120,000,000

$1,972,603

$270,000

Explanation / Answer

Answer:

Increase in cash balance = 240000000 / 365

= 1972603

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