One technique for speeding up collections to reduce

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Unformatted text preview: zero-balance accounts, and investing in marketable securities. Float refers to funds that have been sent by the payer but are not yet usable funds to the payee. The components of float are mail time, processing time, and clearing time. Float occurs in both the average collection period and the average payment period. One technique for speeding up collections to reduce collection float is a lockbox system. A popular technique for slowing payments to increase payment float is controlled disbursing, which involves strategic use of mailing points and bank accounts. The goal for managing operating cash is to balance the opportunity cost of nonearning balances against the transaction cost of temporary LG6 628 PART 5 Short-Term Financial Decisions investments. Firms commonly use depository transfer checks (DTCs), ACH transfers, and wire transfers to transfer lockbox receipts to their concentration banks quickly. Zero-balance accounts (ZBAs) can be used to eliminate nonearning cash balances in SELF-TEST PROBLEMS corporate checking accounts. Marketable securities a...
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This document was uploaded on 01/19/2014.

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