The collection float.

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Answer 1

Question

Chapter 15, Problem 15.14P

a.

Summary Introduction

To determine: The collection float.

b.

Summary Introduction

To determine: Whether it be economically advisable for the firm to pay an annual fee of $16,500 to reduce collection float by 2 days.

c.

Summary Introduction

To determine: The Company’s opportunity cost have to be to make the $16,500 fee worthwhile.

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Simon Corporation has daily cash receipts of $70,000. A recent analysis of its collections indicated that customers' payments were in the mail an average of 3.0 days. Once received, the payments are processed in 2.0 days. After payments are deposited, it takes an average of 3.0 days for these receipts to clear the banking system. a. How much collection float (in days) does the firm currently have? b. If the firm's opportunity cost of capital is 8%, would it be economically advisable for the firm to pay an annual fee of $14,000 to reduce collection float by 2 days? Explain why or why not. c. What would the company's opportunity cost have to be to make the $14,000 fee worthwhile?

American Products is concerned about managing cash efficiently. On the average, inventories have an age of 90 days, and accounts receivable are collected in 60 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Assume there is no difference in the investment per dollar of sales in inventory, receivables, and payables and that there is a 365-day year. a) Calculate the firm’s operating cycle. b) Calculate the firm’s cash conversion cyclec) Calculate the amount of resources needed to support the firm’s cash conversion cycle.

Biondi Manufacturing Company has an average accounts receivable balance of $1,250,000, an average inventory balance of $1,750,000, and an average accounts payable balance of $800,000. Its annual sales are $12,000,000 and its cost of goods sold represents 80 percent of annual sales. Assume there are 365 days in a year. What is BMC’s cash conversion cycle? A. 53.23 days B. 60.83 days C. 84.15 days D. 72.28 days E. 100.55 days

Answer 2

Question

Chapter 15, Problem 15.14P

a.

Summary Introduction

To determine: The collection float.

b.

Summary Introduction

To determine: Whether it be economically advisable for the firm to pay an annual fee of $16,500 to reduce collection float by 2 days.

c.

Summary Introduction

To determine: The Company’s opportunity cost have to be to make the $16,500 fee worthwhile.

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Answer 3

Question

Chapter 15, Problem 15.14P

a.

Summary Introduction

To determine: The collection float.

b.

Summary Introduction

To determine: Whether it be economically advisable for the firm to pay an annual fee of $16,500 to reduce collection float by 2 days.

c.

Summary Introduction

To determine: The Company’s opportunity cost have to be to make the $16,500 fee worthwhile.

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Answer 4

Question

Chapter 15, Problem 15.14P

a.

Summary Introduction

To determine: The collection float.

b.

Summary Introduction

To determine: Whether it be economically advisable for the firm to pay an annual fee of $16,500 to reduce collection float by 2 days.

c.

Summary Introduction

To determine: The Company’s opportunity cost have to be to make the $16,500 fee worthwhile.

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Answer 5

Chapter 15, Problem 15.14P

a.

Summary Introduction

To determine: The collection float.

b.

Summary Introduction

To determine: Whether it be economically advisable for the firm to pay an annual fee of $16,500 to reduce collection float by 2 days.

c.

Summary Introduction

To determine: The Company’s opportunity cost have to be to make the $16,500 fee worthwhile.

Answer 6

Chapter 15, Problem 15.14P

a.

Summary Introduction

To determine: The collection float.

Answer 7

Chapter 15, Problem 15.14P

a.

Summary Introduction

To determine: The collection float.

Answer 8

b.

Summary Introduction

To determine: Whether it be economically advisable for the firm to pay an annual fee of $16,500 to reduce collection float by 2 days.

Answer 9

b.

Summary Introduction

To determine: Whether it be economically advisable for the firm to pay an annual fee of $16,500 to reduce collection float by 2 days.

Answer 10

c.

Summary Introduction

To determine: The Company’s opportunity cost have to be to make the $16,500 fee worthwhile.

Answer 11

c.

Summary Introduction

To determine: The Company’s opportunity cost have to be to make the $16,500 fee worthwhile.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 15.1 - Why is working capital management one of the most...Ch. 15.1 - Prob. 15.2RQ Ch. 15.1 - Prob. 15.3RQ Ch. 15.2 - Prob. 15.4RQ Ch. 15.2 - Prob. 15.5RQ Ch. 15.2 - What are the benefits, costs, and risks of an...Ch. 15.2 - Prob. 15.7RQ Ch. 15.3 - Prob. 1FOP Ch. 15.3 - Prob. 15.8RQ Ch. 15.3 - Briefly describe the following techniques for...

The collection float.

Solution Summary: The author explains that the firm should not pay an annual fee of 16,500 to reduce collection float by 2 days because the savings (1,700) exceed the costs (16,500).

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To determine: The collection float.

To determine: Whether it be economically advisable for the firm to pay an annual fee of $16,500 to reduce collection float by 2 days.

To determine: The Company’s opportunity cost have to be to make the $16,500 fee worthwhile.

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