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Net Profit and Float

Question 20
Beguiling Telecom Corp.'s customers send payments by check, which spend an average of 2 days in the mail. Processing of the checks requires 2 days, and BTC's bank delays availability of the checks for 2 days. Customers send their checks an average of 5 days after they receive their statements. Beguiling Telecom has _______ of collection float.

a. 4
b. 6
c. 7
d. 9
e. 11

Question 21
Bellingham Banners currently has average collection period of 34 days, annual sales of 300,000 units at selling price $30 a piece, and contribution margin $19. It is considering a tightening of credit policy that would reduce average collection period to 20 days and reduce sales to 298,000 units. There are no bad debts, and BB has required return of 9%. What is the net profit from tightening the credit policy?

a. - $26,608
b. - $26,500
c. -$10,608
d. -$9,580
e. $4,115


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