What Is the Difference Between a Lockbox System and Concentration

question 33

Multiple Choice

What is the difference between a lockbox system and concentration banking?

• A)In concentration banking, both physical collection and processing take place close to the customer but in a lockbox system, neither the collections nor processing take place close to the customer.
• B)In a lockbox system, customers' payments are physically collected close to them and much of the processing takes place close to the bank, but in concentration banking both physical collection and processing take place close to the bank.
• C)Concentration banking involves using several banks to fund a large loan and lockbox systems deal with the ability to speed up collections.
• D)None of these.

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Definitions:

Average Tax Rate

The proportion of total income that is paid in taxes, calculated by dividing the total amount of taxes paid by the total income.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, indicating how much of any additional income will be paid in taxes.

Taxable Income

The portion of an individual's or entity's income that is subject to taxation by governmental authorities.

Average Tax Rate

The proportion of total taxable income paid in taxes, calculated by dividing the total tax amount by the total income.