Question 11.6: Consider the same company as in Example 11.5, selling produc...

Analytical Corporate Finance

Consider the same company as in Example 11.5, selling products and being paid with a check of 50,000 €. The company book balance will immediately increase by the amount of 75,000 €, while the bank account will not. If the company starts with a balance of 200,000 € in both the book and the bank, the float scheme looks like:

The blue check mark means that this solution has been answered and checked by an expert. This guarantees that the final answer is accurate.
Learn more on how we answer questions.

Related Answered Questions

Question: 11.11

A company has to decide whether to require a lock-box service to process the checks externally. The finance office collected the following information about cash collection: ...

Verified Answer:

• Collection is planned to be reduced by 2 days on...

Question: 11.10

A company has an average daily float of 1,500,000 € and an average delay of 4 days. The total amount of float is then equal to ...

Verified Answer:

1, 500, 000 × 4 = 6, 000, 000 € Assume the company...

Question: 11.7

Consider the same company as in Examples 11.5 and 11.6. Given the collection float and the disbursement float calculated before, we can calculate the net float as: ...

Verified Answer:

F_{net} =F_{dis} +F_{cll} =50,000-75,000=-2...

Question: 11.9

A company has a disbursement float of 2500 € outstanding for 3 days and will have a float of 2000 € outstanding for the following 4 days. The average daily disbursement float is then ...

Verified Answer:

\frac{2500\times 3+2000\times 4}{3+4} =\fra...

Question: 11.8

A company has a collection float of 2000 € outstanding for 3 days and will have a float of 1500 € outstanding for the following 5 days. The average daily collection float is then ...

Verified Answer:

\frac{2000\times 3+1500\times 5}{3+5} =\fra...

Question: 11.5

Consider a company buying inventory and paying with a check of 50,000 €. The company book balance will be immediately reduced by the amount of 50,000 €, while the bank account will not. If the company starts with a balance of 200,000 € in both the book and the bank, the float scheme looks like: ...

Verified Answer:

Bank balance (€) Book balance (€) Float (€) Init...

Question: 11.4

Assume that the demand for some item is of 100,000 units per year and the lead time for delivery of an order is 3 weeks on average, the amount used during the lead time is ...

Verified Answer:

100,000\left(\frac{3}{52} \right) =5769 un...

Question: 11.3

Assume that a company needs 1000 packs of paper for their printers. The firm issues a purchase order to the supplier at 6 € per pack, for delivery in 7 days. One copy of the purchase order is sent to the supplier, one copy goes to the person requisitioning the cartridges, one copy goes to the ...

Verified Answer:

• The description, quantity, cost, and terms on th...

Question: 11.2

2%, Net 30 terms mean that the payer will deduct 2% from the invoice if payment is made within 30 days. If the payment is made on Day 31, then the full amount is paid. ...

Verified Answer:

The supplier will ship a product and after that wi...

Question: 11.1

Consider a company with the following financial statements: ...

Verified Answer:

In order to calculate the operating cycle and cash...