Cash Management

Assignment 2: Cash Management

By

Wednesday, October 16, 2013

solve the following problem. Norma’s Cat Food of Shell Knob ships

cat food throughout the country. Norma has determined that through the establishment of local collection

centers around the country, she can speed up the collection of payments by two and on

e

-

half days.

Furthermore, the cash management department of her bank has indicated to her that she can defer her

payments on her accounts by one

-

half day without affecting suppliers. The bank has a remote

disbursement center in Iowa.

a.

If the company has $5

million per day in collections and $3 million per day in disbursements, how

many dollars will the cash management system free up?

Justify your answers.

b.

If the company can earn 8 percent per annum on freed

-

up funds, how much will the income be?

Justify you

r answers.

c.

If the annual cost of the new system is $800,000, should it be implemented? Explain why or why

not.

Turn in your completed work to the M2: Assignment 2 Dropbox byWednesday, October 16, 2013.

Assignment 2 Grading Criteria

Maximum

Points

Correctly calculated that amount in dollars the cash

management system will free up and justified the

response.

30

Correctly calculated income and justified response.

30

Clearly explained if the new system should be

implemented.

30

Wrote in a clear, concise, and organized manner;

demonstrated ethical scholarship in accurate

representation and attribution of sources; displayed

accurate spelling, grammar, and punctuation.

10

Total:

100

Assignment 2: Cash Management

By Wednesday, October 16, 2013 solve the following problem. Norma’s Cat Food of Shell Knob ships

cat food throughout the country. Norma has determined that through the establishment of local collection

centers around the country, she can speed up the collection of payments by two and one-half days.

Furthermore, the cash management department of her bank has indicated to her that she can defer her

payments on her accounts by one-half day without affecting suppliers. The bank has a remote

disbursement center in Iowa.

a. If the company has $5 million per day in collections and $3 million per day in disbursements, how

many dollars will the cash management system free up? Justify your answers.

b. If the company can earn 8 percent per annum on freed-up funds, how much will the income be?

Justify your answers.

c. If the annual cost of the new system is $800,000, should it be implemented? Explain why or why

not.

Turn in your completed work to the M2: Assignment 2 Dropbox byWednesday, October 16, 2013.

Assignment 2 Grading Criteria

Maximum

Points

Correctly calculated that amount in dollars the cash

management system will free up and justified the

response.

30

Correctly calculated income and justified response. 30

Clearly explained if the new system should be

implemented.

30

Wrote in a clear, concise, and organized manner;

demonstrated ethical scholarship in accurate

representation and attribution of sources; displayed

accurate spelling, grammar, and punctuation.

10

Total: 100