X Ltd. has a centralised collection system. The firm has a daily average collection of `6,00,000. The

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● X Ltd. has a centralised collection system. The firm has a daily average collection of `6,00,000. The company now wants to adopt a lockbox system. This will save the company 3 days on collection receipt. Further, processing time will also be reduced by 1 day.

1. Calculate the reduction in cash balance of the firm by use of lockbox system.

2. Calculate the annual opportunity cost of the present system, assuming a 6% return on marketable securities.

3. If the annual cost of the lockbox system is `1,00,000, should the company adopt this system?

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Financial Management

ISBN: 9789352605606

1st Edition

Authors: Swapan Sarkar, Bappaditya Biswas, Samyabrata Das, Ashish Kumar Sana

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Question Posted: Jul 23, 2024 01:01 AM

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X Ltd. has a centralised collection system. The firm has a daily average collection of `6,00,000. The

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Financial Management

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