Reference no: EM133275058
eText: Page(s) 204 - 205 1-16
1. Explain the role of each component of collection float.
2. Describe the relationship between collection float and firm liquidity.
3. How might a lockbox collection system improve operating cash flow and firm liquidity?
4. Compare and contrast a retail lockbox system to a wholesale lockbox system.
5. Discuss the cost components of the total cost of cash collection systems.
6. All else constant, what effect will each of the following have on the opportunity cost of collection float?
a. An increase in mail float b. A decrease in the average face value of checks c. A decrease in processing float d. An increase in short-term interest rates e. An increase in variable costs for processing checks
7. Describe cash concentration and its benefits.
8. Suppose a firm earns a market rate on the funds held in deposit accounts at gathering banks. How might funds concentration still benefit the firm?
9. All else constant, which of the following will increase the minimum transfer amount?
a. An increase in the earnings credit rate b. A decrease in the opportunity cost of funds
c. A decrease in the cost of a wire d. A decrease in the cost of an ACH
10. Suppose a manager is asked by the CFO to concentrate a recent deposit of $500,000 made at a gathering bank. If the minimum transfer amount (MinTran) is $350,000, how should the manager make this transfer?
11. Discuss how the disbursement system relates to firm liquidity.
12. Describe the components of disbursement float.
13. What are the advantages of switching from decentralized to centralized disbursing?
14. Discuss the connection between controlled disbursement accounts and ZBAs.
15. Determine the effect of each on the NPV from switching from check to electronic disbursements: a. A decrease in the number of annual disbursements (assume that cost savings exist) b. An increase in the cost of processing a check relative to an ACH c. A decrease in the annual opportunity cost rate d. An increase in the up-front cost of technology required to switch from check to ACH
16. Determine the effect of each of the following on the present value of an ACH disbursement:
a. An increase in the days float of the check
b. An increase in the opportunity cost of funds
c. A decrease in the discounted invoice price
eText: Zietlow, J., Hill, M., Maness, T., (2022) Short-Term Financial Management, 6th Ed. Cognella Academic Publishing.