Average Daily Collection of Checks for a Firm Is $50,000

question 123

Multiple Choice

Average daily collection of checks for a firm is $50,000.The firm also writes on the average $35,000 of checks daily.If the collection period for checks is 5 days,calculate the net float.

• A) -$75,000
• B) $75,000
• C) -$425,000
• D) $425,000

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Definitions:

Accounting Income

Accounting income is the net profit of a company, calculated according to generally accepted accounting principles (GAAP), and includes all revenues and expenses.

Incremental Cash Flows

These are the additional cash flows from operations that a business generates from taking on a new project.

Capital Budgeting

Capital budgeting is the process by which a business evaluates and selects significant long-term investments, based on potential returns and strategic objectives.

Net Acquisition

When there is a purchase and sale of assets (within the same asset class) in the same year, CCA is calculated on the capital cost of the new asset minus the lesser of the original capital cost or the net proceeds from the asset disposed.