The BDF Co. receives five cheques per month, each month. The payments and clearing times are: $4,000, two days; $6,000, two days; $3,000, five days; $8,000, three days, and $7,000, four days. Assume a 360-day year.

What is the weighted average float in receiving the funds?

Question

What is the weighted average float in receiving the funds?

Quizplus · Accepted Answer

The weighted average float is calculated by multiplying each cheque amount by its respective clearing time, summing these products, and then dividing by the total amount of the cheques. The calculation is as follows: $$ \frac{(4000 \times 2) + (6000 \times 2) + (3000 \times 5) + (8000 \times 3) + (7000 \times 4)}{4000 + 6000 + 3000 + 8000 + 7000} = \frac{8000 + 12000 + 15000 + 24000 + 28000}{28000} = \frac{89000}{28000} = 3.178 $$ Rounding to one decimal place gives 3.1 days.