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    Negotiation Agreement

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    As part of a union negotiation agreement, the Union Clerical Workers Union conceded to be paid every two weeks instead of every week. A major firm employing hundreds of clerical workers had a weekly payroll of $1,000,000 and the cost of short-term funds was 12 percent. The effect of this concession was to delay clearing time by one week. Due to the concession, the firm ________ realized an annual loss of $120,000, realized an annual savings of $120,000, increased its cash cycle, or decreased its cash turnover.

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    Wages are now paid every two weeks instead of weekly payments. So, the current liabilities increase by $1.0 million. Since ...

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    The negotiation agreement is discussed in the solution.