A Firm on Average Collects Cheques Totalling $250,000 Per Day

question 65

True/False

A firm on average collects cheques totalling $250,000 per day.It takes the firm approximately 4 days to convert the cheques into usable cash.Assume (1) a lockbox system could be employed that would reduce the cash conversion procedure to 2 1/2 days and (2) the firm could invest any additional cash generated at 6% after taxes.The lockbox system would be a good buy if it costs only $25,000 annually.

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Definitions:

Marginal Revenue

The additional revenue that a company generates from selling one more unit of a good or service.

Average Total Cost

The total cost of production divided by the total number of units produced.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, measuring the opportunity costs of a firm's resources.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, leading to competitive pricing and product differentiation.