Archer Arrow Company examined its cash management policy and found that it takes an average of 5 days for the checks that the company writes to reach its bank and thus be deducted from the checking account balance. On the other hand, it takes an average of 4 days from the time the company receives the checks from its customers until the fund becomes available for use at the bank. On the average, Archer writes a total of P70,000 per day and it receives from customers a total of P80,000 per day. Compute the disbursement float. Compute the collection float. Compute the net float.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter17: The Management Of Cash And Marketable Securities
Section: Chapter Questions
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  1. Archer Arrow Company examined its cash management policy and found that it takes an average of 5 days for the checks that the company writes to reach its bank and thus be deducted from the checking account balance. On the other hand, it takes an average of 4 days from the time the company receives the checks from its customers until the fund becomes available for use at the bank. On the average, Archer writes a total of P70,000 per day and it receives from customers a total of P80,000 per day.
  1. Compute the disbursement float.
  2. Compute the collection float.
  3. Compute the net float.

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