Kelly's Corner writes 18 checks a day for an average amount of $630 each. These checks generally clear the bank 2.5 days after they are written. In addition, the firm generally receives an average of $16,400 a day in checks. Deposited amounts are available after 2 days. What is the amount of the firm's disbursement float?

Question

Quizplus · Accepted Answer

To calculate the disbursement float, we need to subtract the available funds from the outstanding checks.

The amount of outstanding checks per day is:
18 checks/day * $630/check = $11,340/day

Considering that checks clear the bank 2.5 days after they are written, the total outstanding checks are:
18 checks/day * $630/check * 2.5 days = $28,350

The available funds per day are:
$16,400/day

Considering that deposited amounts are available after 2 days, the total available funds are:
$16,400/day * 2 days = $32,800

Therefore, the disbursement float is:
$28,350 - $32,800 = -$4,450

This means that the firm has negative float, which indicates that they need to take action, such as reducing the number of checks they write or increasing the speed of collections.

Kelly's Corner Writes 18 Checks a Day for an Average