Assume That Federated Stores,whose Credit Card Billings Total $120 Billion

question 40

Multiple Choice

Assume that Federated Stores,whose credit card billings total $120 billion per year,were to implement a lockbox arrangement that would speed up the collection of its credit card billings by 2 full days.If Federated could earn 3.5% on its marketable securities,how much would the firm earn per year from such a lockbox arrangement? Assume a 365-day year.

• A) $316.99 million
• B) $244.58 million
• C) $230.14 million
• D) $183.50 million

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Definitions:

Credit Policy

Guidelines that a company follows to determine the creditworthiness of customers, which influence terms of credit and collection procedures.

Total Revenue

The total amount of income generated by the sale of goods or services related to the company's primary operations before any expenses are deducted.

Investment In Receivables

The funds tied up in the credit sales of a company, indicating the amount of money owed by customers for goods or services delivered on credit.

Credit Sales

Sales in which the customer is allowed to purchase goods or services with an agreement to pay at a later date.