Linkup Systems,which Provides Investors with Computerized Information About Stock Prices,is

question 116

Essay

Linkup Systems,which provides investors with computerized information about stock prices,is considering the establishment of a lockbox system with its bank.The firm receives daily remittances of $1.5 million,and could earn 9% on any funds freed up through faster collections.If the lockbox system can save 2 days in the collection process,and the firm's bankers will charge $200,000 per year to operate the lockbox system,is it worth it to establish the system?

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Definitions:

Return On Equity

A measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively a company uses investments to generate earnings growth.

Total Assets

The sum of all holdings and properties owned by a person or entity valued at the end of an accounting period.

Total Equity

The total net worth of a company, calculated as total assets minus total liabilities; represents the owners' claim after debts have been paid.

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the costs of goods sold, demonstrating the profitability of a company.