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How much money has the cash mgt system freed up

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X Inc. has collection centers across the country to speed up collections. The company also makes payments from remote disbursements centers so the firm's checks will take longer to clear the bank. Collection time has been reduced by two and one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are being invested in short-term instruments yielding 6% per annum.

Required:

Question a. If the firm has P4 million per day in collection and P3 million per day in disbursements, how much money has the cash mgt system freed up?

Question b. How much can the firm earn per year on short-term investments made possible by the freed up cash?

Reference no: EM132504532

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