On Average, Your fiRm Receives 50 Checks a Day from Customers

question 161

Multiple Choice

On average, your firm receives 50 checks a day from customers. These checks, on average, are worth $20 each and clear the bank in 4 days. In addition, your firm mails out 40 checks a day with
An average amount of $30. These checks clear your bank in 3 days. What is the average amount of
The collection float?

• A) $1,000
• B) $3,600
• C) $4,000
• D) $4,500
• E) $6,000

---

Definitions:

Credit Sales

Sales made by a business where payment is delayed as per agreed terms, allowing the customer to pay at a later date.

Cash Budget

A forecast of cash inflows and outflows for a business or individual for a specific period of time.

Budgeted Income Statement

A financial statement that forecasts a company's revenue, expenses, and net income for a future period.

Budgeted Balance Sheet

A projection of a company's financial position at a future date, detailing assets, liabilities, and equity.