Problem 6

Calculating Float. In a typical month, the Gulley Corporation receives 100 checks totaling $59, 200. These are delayed three days on average. What is the average daily float? Assume 30 days in a month. Calculating Net Float. Each business day, on average, a company writes checks totaling $23, 400 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling $38, 100. The cash from the payments is available to the firm after two days. a. Calculate the company's disbursement float, collection float, and net float. b. How would your answer to part (a) change if the collected funds were available in one day instead of two? Size of Accounts Receivable. Essence of Skunk Fragrances, Ltd., sells 7, 400 units of its perfume collection each year at a price per unit of $235. All sales are on credit with terms of 1/10, net 30. The discount is taken by 40 percent of the customers. What is the amount of the company's accounts receivable? In reaction to sales by its main competitor, Sewage Spray Essence of Skunk is considering a change in its credit policy to terms of its market share. How will this change in policy