Question 1

On average, LB Inc. receives 138 payments each day with an average value of $42 each. These payments clear the bank in an average of 1.3 days. In addition, it disburses 2.2 checks a day with an average amount of $2,250. These checks clear the bank in two days. What is the average amount of the collection float?

Accepted Answer

A)   $18,473
B)   $3,401
C)   $7,535
D)   $41,965
E)   $49,500

Question 2

A cash concentration account:

Accepted Answer

A)   is frequently used as a source of funds for short-term investments.
B)   cannot be used to cover a compensating balance requirement.
C)   can only be used to transfer funds into zero-balance accounts.
D)   is generally the only bank account needed to efficiently manage cash collections.
E)   is another name for a controlled disbursement account.

Question 3

Freedom Wine receives an average of $684,006 in checks per day. The delay in clearing is typically 1.3 days. The current interest rate is .024 percent per day. Assume each month has 30 days. What is the highest daily fee the company should be willing to pay to eliminate its float entirely?

Accepted Answer

A)   $164
B)   $248
C)   $219
D)   $213
E)   $237

Question 4

Specialty Co. deals strictly with three customers who pay monthly amounts of $340,800, $262,900, and $81,300. The $81,300 payment has a collection delay of 2.5 days while the other two have a delay of 1.5 days. What is the weighted average delay assuming each month has 30 days?

Accepted Answer

A)   1.98 days
B)   1.78 days
C)   2.01 days
D)   1.57 days
E)   1.62 days

Question 5

Roger's Distributors receives an average of 82 checks a day with an average check amount of $16,329. If a lockbox system is implemented the average collection time should decrease by an average of 1.7 days. The daily interest rate on Treasury bills is .009 percent. What is the amount of the expected daily savings of the lockbox system?

Accepted Answer

A)   $192.04
B)   $196.92
C)   $114.95
D)   $222.42
E)   $204.86

Question 6

Cow Chips Inc. can install a lockbox system to speed up collections by two days for an annual fee of $17,000 plus 21 cents per transaction. The average customer payment is $11,480. Treasury bills are currently yielding 3.5 percent per year. Assume a year has 365 days. Approximately how many customers each day, on average, are needed to make this installation profitable for Cow Chips?

Accepted Answer

A)   56.03
B)   23.43
C)   74.50
D)   83.33
E)   89.20

Question 7

Each business day, on average, a company writes checks totalling $41,627 to pay its suppliers. The usual clearing time for these checks is 3.2 days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totalling $59,948. The cash from the payments is available after 1.5 days. What is the amount of the average net float?

Accepted Answer

A)   $57,772
B)   $43,284
C)   $42,318
D)   $57,366
E)   $49,507

Question 8

On an average day, GDF Corp. receives $7,218 in checks from customers. These checks clear the bank in an average of 1.6 days. The applicable daily interest rate is .028 percent. What is the present value of eliminating the float? Assume each month has 30 days.

Accepted Answer

A)   $3
B)   $6
C)   $97
D)   $11,549
E)   $7,218

Question 9

Lockboxes:

Accepted Answer

A)   should be geographically located close to primary customers.
B)   should be located in remote locations to increase the net disbursement float.
C)   offer no additional benefit now that the Check Clearing Act for the 21st Century has been enacted.
D)   tend to be negative net present value projects when they involve a large number of sizable transactions.
E)   tend to also be used as concentration accounts.

Question 10

When Chris balanced her business check book, she had an adjusted bank balance of $8,911. She had three outstanding deposits worth $349 each and seven checks outstanding with a total value of $948. What is the amount of the collection float on this account?

Accepted Answer

A)   $1,090
B)   $1,047
C)   $99
D)   $806
E)   $948

Question 11

RB Enterprises (RBE)  received an unexpected phone call from a competitor offering all of its assets to RBE at a bargain basement price. While RBE had not anticipated purchasing these assets, the opportunity was too good to pass up. This illustrates which one of the following needs to hold cash?

Accepted Answer

A)   Precautionary
B)   Transaction
C)   Speculative
D)   Compensation
E)   Float

Question 12

B&C Co. has an average receipt size of $249. A lockbox service should decrease the average total collection time by 1.6 days at a cost of $95 per day. The company typically receives 2,150 checks per day. The daily Treasury interest rate is .012 percent. What is the NPV of the lockbox project?

Accepted Answer

A)   $64,893
B)   $34,508
C)   $73,013
D)   $28,306
E)   $58,497

Question 13

Your average customer is located 2.9 mailing days away from your office. On average, it takes your staff 1.1 days to process incoming payments and an average of .65 days for your funds to be available for use once you have made your bank deposit. What is your total collection time if 98 percent of your customers pay by mail while the others drop their payment off at your office?

Accepted Answer

A)   4.65 days
B)   4.63 days
C)   4.57 days
D)   4.61 days
E)   4.59 days

Question 14

If Merilee Industries installs a lockbox system it should reduce its average collection time by 2.2 days at a cost of $.75 per check. On an average day, 594 checks with an average value of $4,618 each are received. The daily interest rate on Treasury bills is .009 percent. What is the net present value of this lockbox arrangement?

Accepted Answer

A)   $4,073,492
B)   $2,011,575
C)   $1,387,419
D)   $1,084,802
E)   $974,608

Question 15

Which one of these statements is correct?

Accepted Answer

A)   Mailing time affects both collections and disbursements float.
B)   A positive net float indicates that collection float exceeds disbursements float.
C)   A zero net float is preferred by companies over a positive net float.
D)   Net float is equal to collection float minus disbursement float.
E)   Mailing time is a component of disbursement float.

Question 16

Financial electronic data interchange (FEDI) :

Accepted Answer

A)   electronically processes invoices but not fund transfers.
B)   eliminates the need for lockboxes.
C)   was replaced by the Check Clearing Act for the 21st Century.
D)   eliminates zero-balance accounts.
E)   reduces float.

Question 17

Lasko's Mart has an available balance of $2,315. A deposit of $789 was made this morning and is included in the bank's balance. There are three checks outstanding with a value of $289 each. What is the net float?

Accepted Answer

A)   $867
B)   $78
C)   $789
D)   −$867
E)   −$78

Question 18

International Shoppes receives an average of 418 checks a day with an average amount per check of $607. A lockbox system is expected to reduce the average collection time by 2.3 days. The daily interest rate on Treasury bills is .011 percent. What is the maximum cost per check that can be charged for the company to break-even on the lockbox system?

Accepted Answer

A)   $.154
B)   $.167
C)   $.159
D)   $.163
E)   $.147

Question 19

Hot Tub Builders sells to three retail dealers under an agreement wherein each dealer pays monthly. The average payments are $148,500, $162,900, and $74,500 from these dealers. Each payment has a collection delay of 1.5 days. What is the amount of the average daily receipts assuming each month has 30 days?

Accepted Answer

A)   $12,333
B)   $12,863
C)   $19,295
D)   $16,840
E)   $18,218

Question 20

The Research Center has branch operations in three states. Each branch deals with a local bank. However, all excess funds in these branch bank accounts are transferred on a daily basis to the company's primary bank located near the home office. This routine of transferring cash to the primary bank on a regular basis is referred to as:

Accepted Answer

A)   cash concentration.
B)   strategic cash disbursement.
C)   transfer flotation.
D)   payables management.
E)   float management.

Exam 19: Cash and Liquidity Management

On an average day, GDF Corp. receives $7,218 in checks from customers. These checks clear the bank in an average of 1.6 days. The applicable daily interest rate is .028 percent. What is the present value of eliminating the float? Assume each month has 30 days.

Correct Answer
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When Chris balanced her business check book, she had an adjusted bank balance of $8,911. She had three outstanding deposits worth $349 each and seven checks outstanding with a total value of $948. What is the amount of the collection float on this account?

Correct Answer
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Correct Answer
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Freedom Wine receives an average of $684,006 in checks per day. The delay in clearing is typically 1.3 days. The current interest rate is .024 percent per day. Assume each month has 30 days. What is the highest daily fee the company should be willing to pay to eliminate its float entirely?

Correct Answer
verified

Financial electronic data interchange (FEDI) :

Correct Answer
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RB Enterprises (RBE) received an unexpected phone call from a competitor offering all of its assets to RBE at a bargain basement price. While RBE had not anticipated purchasing these assets, the opportunity was too good to pass up. This illustrates which one of the following needs to hold cash?

Correct Answer
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Correct Answer
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Which one of these statements is correct?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B&C Co. has an average receipt size of $249. A lockbox service should decrease the average total collection time by 1.6 days at a cost of $95 per day. The company typically receives 2,150 checks per day. The daily Treasury interest rate is .012 percent. What is the NPV of the lockbox project?

Correct Answer
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Correct Answer
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Specialty Co. deals strictly with three customers who pay monthly amounts of $340,800, $262,900, and $81,300. The $81,300 payment has a collection delay of 2.5 days while the other two have a delay of 1.5 days. What is the weighted average delay assuming each month has 30 days?

Correct Answer
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A cash concentration account:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Lasko's Mart has an available balance of $2,315. A deposit of $789 was made this morning and is included in the bank's balance. There are three checks outstanding with a value of $289 each. What is the net float?

Correct Answer
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Lockboxes:

Correct Answer
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Exam 19: Cash and Liquidity Management

On an average day, GDF Corp. receives $7,218 in checks from customers. These checks clear the bank in an average of 1.6 days. The applicable daily interest rate is .028 percent. What is the present value of eliminating the float? Assume each month has 30 days.

Correct AnswerverifiedShow Answer

When Chris balanced her business check book, she had an adjusted bank balance of $8,911. She had three outstanding deposits worth $349 each and seven checks outstanding with a total value of $948. What is the amount of the collection float on this account?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Freedom Wine receives an average of $684,006 in checks per day. The delay in clearing is typically 1.3 days. The current interest rate is .024 percent per day. Assume each month has 30 days. What is the highest daily fee the company should be willing to pay to eliminate its float entirely?

Correct AnswerverifiedShow Answer

Financial electronic data interchange (FEDI) :

Correct AnswerverifiedShow Answer

RB Enterprises (RBE) received an unexpected phone call from a competitor offering all of its assets to RBE at a bargain basement price. While RBE had not anticipated purchasing these assets, the opportunity was too good to pass up. This illustrates which one of the following needs to hold cash?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of these statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

B&C Co. has an average receipt size of $249. A lockbox service should decrease the average total collection time by 1.6 days at a cost of $95 per day. The company typically receives 2,150 checks per day. The daily Treasury interest rate is .012 percent. What is the NPV of the lockbox project?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Specialty Co. deals strictly with three customers who pay monthly amounts of $340,800, $262,900, and $81,300. The $81,300 payment has a collection delay of 2.5 days while the other two have a delay of 1.5 days. What is the weighted average delay assuming each month has 30 days?

Correct AnswerverifiedShow Answer

A cash concentration account:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Lasko's Mart has an available balance of $2,315. A deposit of $789 was made this morning and is included in the bank's balance. There are three checks outstanding with a value of $289 each. What is the net float?

Correct AnswerverifiedShow Answer

Lockboxes:

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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