Short-term investments made possible by freed-up cash

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Reference no: EM131566173

Beth’s Society Clothiers, Inc., has collection centers across the country to speed up collections. The company also makes payments from remote disbursement centers so the firm’s checks will take longer to clear the bank. Collection time has been reduced by three days and disbursement time increased by two days because of these policies. Excess funds are being invested in short-term instruments yielding 4 percent per annum.

(a) If the firm has $4.40 million per day in collections and $3.40 million per day in disbursements, how many dollars has the cash management system freed up? (Enter your answer in dollars not in millions. Omit the "$" sign in your response.) Freed-up funds $

(b) How much can the firm earn in dollars per year on short-term investments made possible by the freed-up cash?

Reference no: EM131566173

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