Each business day, on average, a company writes checks totaling $12,900 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling $23,900. The cash from the payments is available to the firm after two days.
Calculate the company’s disbursement float, collection float, and net float

A.Disbursement float: $51,600

Collection float:–$47,800

Net float $27,700

B.New collection float -23,900

New net float $27,700

Explanation:

A. The disbursement float can be defined as the average monthly checks written times the average number of days for the checks to clear.

Disbursement float = 4($12,900)

Disbursement float = $51,600

The collection float can be seen as the average monthly checks received times the average number of days for the checks to clear.

Collection float = 2(–$23,900)

Collection float = –$47,800

The net float can be defined as the disbursement float plus the collection float, so:

Net float = $51,600 – $47,800

Net float = $3,800

B. New collection float will be:

Collection float = 1(–$23,900)

Collection float = –$23,900

And the new net float will be:

Net float = $51,600 – 23,900

Net float = $27,700

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