Working capital and current assets management 621

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Unformatted text preview: egularly by the firm’s bank, who processes the payments and deposits them in the firm’s account. This system speeds up collection time by reducing processing time as well as mail and clearing time. Working Capital and Current Assets Management 621 until the firm mails its payment and (2) the receipt, processing, and collection time required by the firm’s suppliers. The receipt, processing, and collection time for the firm, both from its customers and to its suppliers, is the focus of receipts and disbursements management. Float Float refers to funds that have been sent by the payer but are not yet usable funds to the payee. Float is important in the cash conversion cycle because its presence lengthens both the firm’s average collection period and its average payment period. However, the goal of the firm should be to shorten its average collection period and lengthen its average payment period. Both can be accomplished by managing float. Float has three component parts: 1. Mail float is the time delay between when payment is placed in the mail and when it is received. 2. Processing f...
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This document was uploaded on 01/19/2014.

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