On an Average Day, Your fiRm Receives $10,600 in Checks

question 146

Multiple Choice

On an average day, your firm receives $10,600 in checks from customers. These checks clear the bank in an average of 4 days. The applicable daily interest rate is .02 percent. What is the highest
Daily fee your firm should pay to completely eliminate the collection float? Assume each month has
30 days.

• A) $6.36
• B) $8.48
• C) $15.90
• D) $21.20
• E) $25.40

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Definitions:

Base Amount

The initial value or standard measure that is used as a reference point for calculations, comparisons, or adjustments.

Acid-test Ratio

The acid-test ratio is a financial metric used to assess a company's ability to pay off its short-term liabilities with its most liquid assets, excluding inventory.

Short-term Investments

Financial assets that are expected to be converted into cash or sold within a year or the operating cycle, whichever is longer.

Current Liabilities

Short-term financial obligations that are due to be paid within one year, such as accounts payable, short-term loans, and taxes owed.