TTT Inc., a moderately profitable producer of beauty supplies, has been in business since the 1960s and ha s been selling its products through its retailer network. Your company is considering launching several new products. Retailer remittances have grown to an average of $200,000 each business day, with additional collections of $1,250,000 a day for e very 4 days following the special occasions of Valentines Day, Mothers Day , 24 th of June , and Christmas Day . TTT Inc. employed you as a financial analyst.

You have been assigned to perform due diligence for this potential investment by conducting risk - assessment procedures. The company is continuing to expand its network of retail outlets and introduce new lines of c onsumer products, expecting continued growth for the coming years. One of your responsibilities is to direct TTTs cash management function . The company has centralized operations and you found that retailer remittances take an average of 5 mail days to re ach the company, and an additional two days are needed for in - house processing before bank deposits are made. Immediately, after these findings, you have investigated various regional lockbox arrangements as a means to accelerate this cash collection proc ess . Considering a three - bank system in different locations in the country, mail times could be reduced by two days. The in - house check processing would be eliminated. The banks would provide the company with a listing of daily transactions and any support ing documents that retailers submit with payments. The lockbox service charges would be $1,000 per month for each bank, and it is estimated that 6% interest could be earned on short - term investments. You have considered various ways of investing available funds, including the use of marketable securities. This is important during the peak periods when cash inflows are large.

Required:

a. Describe the responsibilities of the cash management function .

b. Describe at least two motives for a company to hold cash.

c. Explain at least three characteristics of marketable securities that a company should consider when investing.

d. Identify at least three types of financial instruments that would meet the companys cash and investing needs.

e. Analyze whether the company should implement a lockbox system by preparing an analysis using a 360 - day year. Annotations