question archive 1) The company’s cash flow cycle extends up to 50 days
1) The company’s cash flow cycle extends up to 50 days
Subject:FinancePrice:2.86 Bought3
1) The company’s cash flow cycle extends up to 50 days. Receivables age is for 20 days. Average age in inventory is twice as long as days receivable. For how long is the company’s deferral period?
2) Assume that each day a company writes and receives checks totalling P10,000. If it takes 5 days for the checks to clear and be deducted from the company’s account, and only 4 days for the deposits to clear, what is the float?
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
1.The company’s deferral period = 10 days
Workings:
Cash flow cycle = Average age in inventory + Receivables age - Accounts payable deferral period
50 = (2*20) + 20-Accounts payable deferral period
Accounts payable deferral period = 60- 50 = 10 days
2. Float = 10,000
Workings:
Float is the difference between the time the check is written and the time taken to clear the check. In this case the difference is 1 day and hence P 10,000 is the float.
