Asked by Carissa Gulli on Jul 05, 2024
Verified
Your average customer is located 5 mailing days away from your firm. You have determined that on average it is taking your firm 2 days to process payments received from customers. In addition, it takes 3 days for your funds to be available for use once you have made your bank deposit. What is your firm's collection time?
A) 1 day
B) 4 days
C) 6 days
D) 7 days
E) 10 days
Collection Time
The average time it takes for a business to collect payments owed by its customers.
Mailing Days
Mailing days refer to the business days considered for the processing and delivery of mail.
Process Payments
The procedure of completing financial transactions by transferring funds from one party to another.
- Grasp the concept of collection time and its impact on firm's cash flow.
Verified Answer
PA
Prerna AroraJul 07, 2024
Final Answer :
E
Explanation :
The firm's collection time is the sum of the mailing days (5 days), processing time (2 days), and the time for funds to be available (3 days), totaling 10 days.
Learning Objectives
- Grasp the concept of collection time and its impact on firm's cash flow.
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