eon Light Company of Kansas City ships lamps and lighting appliances throughout
ID: 2785189 • Letter: E
Question
eon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. a. If Neon Light Company has $3.15 million per day in collections and $1.23 million per day in disbursements, how many dollars will the cash management system free up? (Enter your answer in dollars not in millions (e.g., $1,234,567).)
Explanation / Answer
Total collection cash freed up = $3,150,000 × 2
= $6,300,000
Total collection cash freed up is $6,300,000.
Total Disbursement cash freed up = $1,230,000 × 1 / 2
= $615,000.
Total Disbursement cash freed up is $615,000.
Total Cash freed up = $6,300,000 + $615,000
= $6,915,000.
Total Cash freed up is $6,915,000.
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