City Farm Insurance has collection centers across the country to speed up collec

Question

City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers so the firm's checks will take longer to clear the bank. Collection time has been reduced by three days and disbursement time increased by one-half day because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. a. If City Farm has $4.10 million per day in collections and $3.10 million per day in disbursements, how many dollars has the cash management system freed up?

Explanation / Answer

$4,100,000 daily collections * 3 days speed up=$12,300,000 additional collections

$3,100,000 daily disbursements * 1.5 days slow down =$4,650,000 delayed disbursements

Freed-up funds=$12,300,000 additional collections+$4,650,000 delayed disbursements

=$16,950,000

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.