Exam 21: Cash and Inventory Management

Fast Bucks Inc.has offered to set up a concentration banking system that will save three days of mail float and one day of presentation float.Your receivables average $20,000 per day and the opportunity cost of funds is 6 percent.How much would you be willing to pay Fast Bucks annually to administer the system perpetually?

Where do firms invest excess funds until they are needed to pay bills?

Lockbox systems allow local banks to collect and process the firm's remittance from that area.

What is the benefit for a firm with daily sales of $30,000 to be able to speed up collections by three days, assuming an 8 percent annual opportunity cost of funds?

Your bank account currently shows a balance of $1,880.You deposit $200 into the account and write a cheque for $80. Show that your ledger balance plus payment float equals the bank's ledger balance, which in turn equals the available balance plus availability float.

The economic order quantity:

What is the average inventory level, based on EOQ, for a firm that has annual sales of 2,500 units, costs per order of $45, and carrying costs of $5 per unit?

Calculate EOQ given the following information: Annulal Bales \ 750,000 Cost per order \ 60 Carrying Cost \ 0.10

From the day a cheque is put in the mail, discuss the delays before it is credited or debited appropriately; e.g., discuss the issue from the perspective of both payer and recipient.

Which of the following statements is true regarding repurchase agreements?

Preauthorized payments allow customers to do one of the following.

What are the cost and benefit of holding inventories?

Find the break-even size of wire transfer if the cost of wire transfer is $20, the daily interest rate is 0.02 percent and the reduction in float is three days.

Your bank account currently shows a balance of $1,880.You deposit $200 into the account and write a cheque for $80.What is the ledger balance on your account?

What are the cost and benefits of holding cash?

Your bank account currently shows a balance of $1,880.You deposit $200 into the account and write a cheque for $80. What is the payment float?

Short-term securities are safe to keep idle cash balance.Choose from the following, one appropriate reason for this.

Just-in-time inventory management is suitable for an aircraft manufacturer, like Boeing, whose production schedules are known well in advance.

What is float and why can it be valuable?

Potential savings from a lockbox system will be reduced by: