15.5 Management of Receipts and Disbursements

  1. LG6

The third component of the cash conversion cycle, the average payment period, also has two parts: (1) the time from purchase of goods on account 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 ...

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