CM Enterprises Estimates That It Takes, on Average, Seven Days

question 30

Multiple Choice

CM Enterprises estimates that it takes, on average, seven days for their customers' payments to reach them, one day for the payments to be processed and deposited by their bookkeeping department, and three more days for the checks to clear once they're deposited. What is their collection float?

• A) 7 days
• B) 8 days
• C) 10 days
• D) 11 days

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Definitions:

Inventory Management

The supervision of non-capitalized assets and stock items, including the management of ordering, storing, and using a company's inventory.

ABC Approach

A methodology used in inventory management and cost accounting that prioritizes items based on their importance, cost, or another criterion, often categorized into A, B, and C groups.

Cash Discount

A reduction in the invoice amount by a seller if the buyer pays within a specified period, incentivizing early payment.

Purchases Discount

Purchases Discount represents a reduction in the price of goods a company buys, usually offered by suppliers as an incentive for early payment.