Multiple Choice QuestionWhich type of company will benefit the most from having a lockbox?Multiple choice question.A company that has no current liabilities.A company that rarely receives checks as a form of payment.A company that receives thousands of checks each day.A company that only accepts credit card payments.
Question
Multiple Choice QuestionWhich type of company will benefit the most from having a lockbox?Multiple choice question.A company that has no current liabilities.A company that rarely receives checks as a form of payment.A company that receives thousands of checks each day.A company that only accepts credit card payments.
Solution
The correct answer is:
A company that receives thousands of checks each day.
Explanation:
A lockbox service is a service provided by banks to companies for the receipt of payment from customers. Under the service, the payments made by customers are directed to a special post office box, rather than going to the company. The bank goes to the box, retrieves the payments, processes them and deposits the funds directly into the company's bank account.
This service can significantly speed up the process of collecting and processing large volumes of checks, which is why a company that receives thousands of checks each day would benefit the most from having a lockbox. It reduces the time it takes for a company to receive payments, thus improving cash flow. It also reduces the company's workload, as the bank handles the processing of the checks.
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