Clearwater Glass Company examined its cash management policy and found that it t

Question

Clearwater Glass Company examined its cash management policy and found that it takes an average of five days for checks that the company writes to reach its bank and thus to be deducted from its checking account balance. On the other hand, an average of four days elapses from the time Clearwater Glass receives payments from its customers until the funds are available for use at its bank.

On an average day, clearwater glass writes checks that total $70,000 and it receives checks from customers that total $80,000.


If Clearwater Glass has an opportunity cost equal to 10 percent, how much would it be willing to spend each year to reduce collection delay by two days?

Explanation / Answer

On an average day, clearwater glass writes checks that total $70,000 and it receives checks from customers that total $80,000.

and f Clearwater Glass has an opportunity cost equal to 10 percent, how much would it be willing to spend each year to reduce collection delay by two days?

clearwater glass writes checks that total $70,000

here total amount 10% is $7,000 is spend each year and delay two days delay collection amount is $ 38.34

other wise

receives chech amount from customer is $80,000.

here total amount 10% is $80,000 and

total amount 10% is $ 8000, and two days delay amount collection is around $ 40

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