You Are Considering Implementing a Lockbox System for Your fiRm

question 232

Multiple Choice

You are considering implementing a lockbox system for your firm. The system is expected to reduce the collection time by 1 day. On an average day, your firm receives 90 checks with an average value
Of $105 each. The daily interest rate on Treasury bills is .03 percent. The bank charge per check
Would be $.25. What is the anticipated daily cost of the lockbox system?

• A) $2.70
• B) $2.84
• C) $12.60
• D) $22.50
• E) $26.25

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Definitions:

Receivables Ratio

A financial metric used to assess how efficiently a company uses its assets, particularly measuring how many times a company collects its average receivables within a certain period.

Vertical Analysis

An accounting method where each entry in a financial statement is listed as a percentage of another item, facilitating ratio analysis and comparisons.

Statement Of Financial Position

The statement of financial position, commonly known as the balance sheet, reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

Current Liabilities

Obligations or debts that a company needs to settle within one fiscal year or its operating cycle, whichever is longer.