Answer (A) is correct . The difference between collections and payables is $5,000 daily. Five days’ worth amounts to $25,000 of float.
Answer (B) is incorrect because The amount of $40,000 ignores the impact of payables and the 5-day float period.
Answer (C) is incorrect because The amount of $175,000 ignores the impact of receivables.
Answer (D) is incorrect because The amount of $200,000 ignores the impact of payables.
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