Question

On an average day, Amaranth writes checks totaling $3,000. These checks take an average of 4 days to clear. On an average day, Amaranth receives checks totaling $3,500 which take 2 days to clear. The cost of debt is 6.8 percent. What is the firm's disbursement float?

$7,000

$5,000

$12,000

-$7,000

-$5,000

Answer 1

The firm's disbursement float, calculated as average daily outflows times the average delay in days, is $12,000. This represents the dollar amount of checks written that are yet to be processed and deducted from the firm's account.

Step-by-step explanation:

The firm's disbursement float is determined by the amount of money the firm writes in checks and the time it takes for these checks to clear.

Specifically, the question asks about the average disbursement float on an average day when Amaranth writes checks totaling $3,000 that take 4 days to clear. To calculate the disbursement float:

Disbursement Float = Average Daily Outflows x Average Delay in Days
Disbursement Float = $3,000 x 4 days = $12,000.

Therefore, the correct answer is $12,000.