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About this document
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- 1 page
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- Format
- Subject
- Business Management, Finance
- Module
- Assignment 2
This assignment covers cash management strategies for Norma’s Cat Food. It asks students to calculate the funds freed up by speeding up collections and deferring payments, the income from investing those funds, and whether to implement the new system based on its cost. It is Assignment 2.
What's inside
- Speeding up collections
- Deferring payments
- Calculating freed-up funds
- Calculating income from invested funds
- Evaluating system implementation
Who it is for: Students taking a course in finance or business management. (Undergraduate)
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Summary
Cash management helps companies handle their money. Students learn how to calculate the benefits of a new cash management system.
Collections and disbursements
Collections are the payments that a company receives. Disbursements are the payments that a company makes. A company can speed up collections and slow down disbursements.
Calculating freed-up funds
A company can calculate the amount of money that a new cash management system will free up. This is done by multiplying the daily collections by the number of days speed up. Then multiply the daily disbursements by the number of days slow down.
Calculating income from freed-up funds
A company can calculate the income that it can earn from the freed-up funds. This is done by multiplying the freed-up funds by the interest rate.
Deciding whether to implement the system
A company can decide whether to implement a new cash management system. This is done by comparing the annual cost of the system with the annual net savings.
Key terms
- collections
- Payments that a company receives.
- disbursements
- Payments that a company makes.
- freed-up funds
- Money that a company can use because of a new cash management system.
- annual net savings
- The difference between the annual income from freed-up funds and the annual cost of the system.
- remote disbursement center
- A center that a bank uses to make payments for a company.
- interest rate
- The percentage that a company can earn on freed-up funds.
Questions this document helps with
- How can a company speed up its collections?
- How can a company slow down its disbursements?
- How can a company calculate the income from freed-up funds?
Summary written with AI from the document's text.
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