Concentration Banking is a method of :
Decentralised collection
Concentration banking is a technique of speeding up the collection of receivables. Instead of all customers sending payments to the head office, the firm opens collection centres (and local bank accounts) at several places where its customers are concentrated.
Customers pay at the nearest collection centre; the cheques are deposited locally and cleared quickly, and surplus funds are then transferred to the firm's central (concentration) bank account at the head office.
Because collections are made at many dispersed points rather than at one central office, concentration banking is a system of decentralised collection. It reduces mailing time and clearing time, freeing cash sooner.
A centralised system would mean all receipts come to one office, which is exactly the delay concentration banking avoids. It is not restricted to cheques either; it is a collection arrangement, not a payment rule.
Hence, Decentralised collection.
Similar Questions
Statement - I : Working capital leverage measures the responsiveness of Return on Equity for changes in current Assets.
Statement - II : When the annual demand for an item is 3200 units, unit cost ₹ 6, inventory carrying charges 25% p.a. and cost of one procurement ₹ 150, the economic ordering quantity would be 700 units.
Codes :
The formula \(\frac{Q}{2}\) is used to compute the :
Match the items of List – I with the items of List – II :
List – I List – II (a) Trade credit and other payables that arise in the firm’s day today operations (i) Maturity Financing (b) Financing and asset needs over time (ii) Factoring (c) A tool for accelerating the collection from the customers (iii) Spontaneous financing (d) Seeking financial service to finance on its debtors’ balances (iv) Lockbox system Codes :
(a) (b) (c) (d)
Insufficient working capital in any enterprise may also result into
I. Failure to adapt to changes
II. Overcapitalisation
III. Reduced availability of trade and cash discounts
IV. Reduced volume of production and sales
Codes :
Which one of the following emphasizes the qualitative aspects of working capital management ?
Cash Flow Management involves :
I. Lock-box system
II. Marketable securities
III. Playing the float
IV. Concentration Bank Account
Codes :
Important Questions from Working Capital
Which of the following physical capitals is a working capital for a factory?
As per which one of the following approaches, a firm finances a part of its permanent working capital with short term financing?
Which of the following is not the problem of human capital formation?
Which one of the following will have a net change in the amount of working capital of a company?
_______ refers to the funds, which an organisation must possess to finance its day to day operations.
