If Average Daily Remittances Are $6 Million, and "Extended Disbursement

question 130

Multiple Choice

If average daily remittances are $6 million, and "extended disbursement float" adds two days to the disbursement schedule, how much should the firm be willing to pay for a cash management system if the firm earns 7% on excess funds?

• A) $420,000
• B) $1,200,000
• C) $0
• D) $840,000

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Definitions:

Gross Amount

The total amount before any deductions, such as taxes, expenses, or discounts, are subtracted.

Trade Receivables

Trade receivables are amounts due to a business for goods sold or services provided on credit terms to customers.

Formal Instrument

A legal document expressing an agreement, obligation, or right enforceable by law.

Note Receivable

A financial asset representing a written promise for the repayment of a specific amount of money, plus interest, by a debtor to the lender at a future date.