Lockbox arrangement benefits include
A) increased working capital from shorter receivables/cash transformation time.
B) elimination of bank charges for handling and audit functions.
C) increased cash flows from delays in uncollectible check processing.
D) all of the above are benefits from this arrangement.

Question

Quizplus · Accepted Answer

The lockbox arrangement helps companies reduce their collections time and thus decrease the time it takes to convert receivables into cash, resulting in increased working capital. This arrangement does not eliminate bank charges for handling and audit functions nor does it increase cash flows from delays in uncollectible check processing. Therefore, option A is the best choice.

Lockbox Arrangement Benefits Include