Question

25. On a daily basis, a company sends out cheques worth $44,289 to its supplier. The cheques take 3 days to clear. At the same time, the company receives payments of $70,857 from customers daily. These collections take one (1) day to deposit and another day for the bank to process them. What is the absolute value of the company's net daily float?

Answer 1

Company sends cheques worth $44,289 to its suppliers daily and it takes 3 days to clear .

So, disbursement float =

= Amount of cheque sent * days to clear the cheques

= $44,289 * 3

= $132,867

The company receives cheques worth $70,857 from its customers and it takes 1 day to deposit the cheques and 1 day for its processing . So it takes total 2 days for the amount to make available .

So, collection float =

= - ( Amount of cheques collected * No . Of days for its its clearance )

= - ( $70,857 * 2 )

= - $141,714

Net daily float :-

= Disbursement float + collection float

= $132,867 + ( - $141,714)

= $132,867 - $141,714

= - $8,847

Absolute value of net daily float is $8,847 because absolute values are positive .