Burke Corporation Is Investigating a Lockbox System to Reduce Its

question 236

Multiple Choice

Burke Corporation is investigating a lockbox system to reduce its collection time. It has determined that on average, there are 900 payments with an average value of $425 each. If a lockbox system is implemented, the lockbox fee per transaction will be $0.15. If the collection time can be reduced by 4 days, and the daily interest on money market securities is.02%, then determine the net cash flow per day from adopting the system.

• A) $170
• B) $171
• C) $172
• D) $173
• E) $174

---

Definitions:

Average Collection Period

The average amount of time it takes for a company to receive payments owed by its customers, indicating the efficiency of its credit and collections policies.

Return on Equity

A measure of a corporation's profitability, calculated by dividing net income by shareholder equity, indicating how effectively equity is utilized to generate profits.

Return on Assets

A financial ratio indicating the profitability of a company relative to its total assets, measuring how efficiently assets generate profits.

Fixed Asset Turnover

A financial ratio that measures how efficiently a company uses its fixed assets to generate sales.