Purchase Solution

Working Capital and Current Assets Management

Not what you're looking for?

Ask Custom Question

I am having a hard time with this problem and can't seem to figure it out. Please help.

Problem
Simon Corporation has daily cash receipts of $65,000. A recent analysis of its collections indicated that customers' payments were in the mail an average of 2.5 days. Once received, the payments are processed in 1.5 days. After payments are deposited, it takes an average of 3 days for these receipts to clear the banking system.

a. How much collection float (in days) does the firm currently have?
b. If the firm's opportunity cost is 11%, would it be economically advisable for the firm to pay an annual fee of $16,500 to reduce collection float by 3 days? Explain why or why not.

Purchase this Solution
Solution Summary

Solution solves problem related to collection floats.

Solution Preview

a. How much collection float (in days) does the firm currently have?
Currently firm is having following float:
= Duration of Mail + Processing + ...

Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Motivation

This tests some key elements of major motivation theories.

View More Free Quizzes
Related BrainMass Solutions

  • Correlation between Working-Capital Management and Wealth

    81470 Correlation between Working-Capital Management and Wealth What is the correlation between working-capital management and maximizing shareholder wealth? Working capital is the firm's total current assets used in operations.

  • Short-Term Financing and Working Capital

    Working capital is the firm's total current assets used in operations. Working capital = total current assets. These current assets include cash, marketable securities, prepaid expenses, accounts receivable, inventory, and other current assets.

  • Metrics available for working capital management

    Working capital is the firm's total current assets used in operations. Working capital = total current assets. These current assets include cash, marketable securities, prepaid expenses, accounts receivable, inventory, and other current assets.

  • Elements of working capital

    Management Accounting by Khan & Jain This quantify the elements of working capital for both Raytheon and Boeing

  • Devising Working Capital Strategies

    Working capital is the firm's total current assets used in operations. Working capital = total current assets. These current assets include cash, marketable securities, prepaid expenses, accounts receivable, inventory, and other current assets.

  • Dynamic Mattress and working capital management

    141136 Working Capital Management Indicate how each of the following six different transactions that Dynamic Mattress might make would affect (i) cash and (ii) net working capital: Working Capital Management - indicate how each of the following six

  • proper working capital management

    Working capital, properly defined, is the sum of a health care organization's investment in current assets, or simply defined as total current assets.

  • Working capital decisions based on forecasted financial data

    Gross working capital denotes the amount invested in the current assets.Net working capital means the difference between the current assets and current liabilities.

  • Does working capital management also include the turnover of A/R, inventory and payables?

    Working capital is the firm's total current assets used in operations. Working capital = total current assets These current assets include cash, marketable securities, prepaid expenses, accounts receivable, inventory, and other current assets.

  • Working Capital Management and Operating cycle

    48825 Working capital management and Operating cycle Q1 Two companies, A and B, have the following balance sheet accounts: A B Current assets $ 150 $ 800 Fixed assets 300 2200 Current liabilities 75 600 Long-term debt 75 1000 Equity 300 1400

View More Related Solutions