Question 1

On average, your firm receives 65 checks a day from customers.These checks, on average, are worth $39.90 each and clear the bank in 1.5 days.In addition, your firm disburses 38 checks a day with an average amount of $89.50.These checks clear your bank in 2 days.What is the average amount of the collection float?

Accepted Answer

Collection float = 65 × $39.90 × 1.5 = $3,890.25

Question 2

When Chris balanced her business checkbook, she had an adjusted bank balance of $11,418.She had 2 outstanding deposits worth $879 each and 11 checks outstanding with a total value of $3,648.What is the amount of the collection float on this account?

Accepted Answer

Collection float = $879 × 2 = $1,758

Question 3

Your firm generally receives 4 checks a month.The check amounts and the collection delay for each check is shown below.Given this information what is the amount of the average daily float? Assume a 30 day month.

Accepted Answer

The answer of Your firm generally receives 4 checks a...

Question 4

The Hobby Shop has a checking account with a ledger balance of $692.The firm has $1,063 in uncollected deposits and $930 in outstanding checks.What is the amount of the disbursement float on this account?

Accepted Answer

Disbursement float = $930

Question 5

Cross Country Trucking provides transportation services exclusively for four customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information, what is the weighted average delay? Assume each month has 30 days.

Accepted Answer

The answer of Cross Country Trucking provides transportation services exclusively...

Question 6

The Blue Star generally receives only 3 checks a month.The check amounts and the collection delay for each check are shown below.Given this information, what is the amount of the average daily float? Assume every month has 30 days.

Accepted Answer

The answer of The Blue Star generally receives only 3...

Question 7

Atlas Builders deals strictly with five customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information, what is the amount of the average daily receipts? Assume every month has 30 days.

Accepted Answer

The answer of Atlas Builders deals strictly with five customers.The...

Question 8

The Metallurgical Specialty Co.deals strictly with four customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information, what is the weighted average delay? Assume each month has 30 days.

Accepted Answer

The answer of The Metallurgical Specialty Co.deals strictly with four...

Question 9

The BAT model is used to:

Accepted Answer

The answer of The BAT model is used to:
...

Question 10

Hoyes Lumber generally receives 3 checks a month.The check amounts and the collection delay for each check are shown below.Given this information, what is the amount of the average daily float? Assume each month has 30 days.

Accepted Answer

The answer of Hoyes Lumber generally receives 3 checks a...

Question 11

Your company has an available balance of $7,911.A deposit of $2,480 that was made this morning is not yet included in the bank's balance.There are also 4 checks outstanding with a value of $360 each.What is the net float?

Accepted Answer

Net collection float = $2,480 - (4 × $360) = $1,040

Question 12

On an average day, Plastics Enterprises writes 42 checks with an average amount of $587.These checks clear the bank in an average of 2 days.What is the average amount of the disbursement float?

Accepted Answer

Disbursement float = 42 × $587 × 2 = $49,308

Question 13

High Brow Express deals strictly with two customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information, what is the weighted average delay? Assume that every month has 30 days.

Accepted Answer

The answer of High Brow Express deals strictly with two...

Question 14

A firm has $16,718 in outstanding checks that have not cleared the bank.The firm also has $13,450 in deposits that have been recorded by the firm but not by the bank.The current available balance is $11,407.What is the status of the net float?

Accepted Answer

Net disbursement float = $16,718 - $13,450 = $3,268

Question 15

Hot Tub Builders sells to three retail outlets.Each retailer pays once a month in the amounts shown below.The collection delay associated with each payment is also given below.What is the amount of the average daily receipts if you assume each month has 30 days?

Accepted Answer

The answer of Hot Tub Builders sells to three retail...

Question 16

The Food Wholesaler generally receives 4 checks a month.The check amounts and the collection delay for each check are shown below.Given this information, what is the amount of the average daily float? Assume every month has 30 days.

Accepted Answer

The answer of The Food Wholesaler generally receives 4 checks...

Question 17

National Exporters deals strictly with two customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information, what is the amount of the average daily receipts? Assume that every month has 30 days.

Accepted Answer

The answer of National Exporters deals strictly with two customers.The...

Question 18

The Miller-Orr model:

Accepted Answer

The Miller-Orr model recommends investing an amount described as (U* - C) in marketable securities when the cash balance reaches U*. This is known as the upper limit or upper control limit. The model also recommends selling securities in an amount equal to (U* - C) when the cash balance reaches the lower limit or lower control limit, which is equal to L. The optimal level of cash balances in this model is based on both the opportunity costs of holding cash and the transaction costs associated with buying and selling securities. The target cash balance may increase as order costs increase, contrary to the argument stated in option D.

Question 19

The Miller-Orr model assumes that:

Accepted Answer

The answer of The Miller-Orr model assumes that:
...

Question 20

Which of the following statements is correct?

Accepted Answer

The cost of borrowing affects the cost of holding cash, so a higher interest rate will make it more expensive to hold cash and increase the target cash balance. Option A is incorrect, as a stable cash flow does not necessarily mean that a firm does not need unexpected funds. Options C, D, and E are also incorrect as they do not accurately reflect the relationship between borrowing needs and cash management decisions.

Quiz 19: Behavioural Finance