The daily cash inflows of a company amount to $ 65,000.00. A recent analysis of their collections revealed that it took 21/2 days for customer payments to arrive by mail. Once received, the company required 11/2 days to process them, and three days after they were deposited they appeared in the bank balances. a) What is the delay (in days) that the company normally experiences in the collection of its accounts? b) If the opportunity cost of the company is 11%, is it advisable for the company to pay an annual fee of $ 16,500.00 in order to reduce the delay in the collection of accounts by 3 days? Explain your answer.
The daily cash inflows of a company amount to $ 65,000.00. A recent analysis of their collections revealed that it took 21/2 days for customer payments to arrive by mail. Once received, the company required 11/2 days to process them, and three days after they were deposited they appeared in the bank balances. a) What is the delay (in days) that the company normally experiences in the collection of its accounts? b) If the opportunity cost of the company is 11%, is it advisable for the company to pay an annual fee of $ 16,500.00 in order to reduce the delay in the collection of accounts by 3 days? Explain your answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education