Purchase Solution

Cash balance/ float concepts

Not what you're looking for?

Ask Custom Question

A company has the following cash balance:
Company's ledger balance = $600,000
Bank's ledger balance = $625,000
Available balance = $550,000

a. Calculate the payment float and availability float
b. Why does the company gain from the payment float?
c. Suppose the company adopts a policy of writing checks on a remote bank. How is this likely to affect the three measures of cash balance?

Purchase this Solution
Solution Summary

A paragraph explains each question. No references.

Solution Preview

a) Payment Float = Bank's ledger balance - Company's ledger balance
=$625,000 - $600,000 = $25,000

Availability Float = Bank's ledger balance - Available Balance
=625,000 -550,000 = 75,000

b) The finance manager adjusts the companies ledger balance when the checks are issued by him / her but the bank balance for the company will adjust its accounts only when the checks are presented ...

Purchase this Solution
Free BrainMass Quizzes
Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Motivation

This tests some key elements of major motivation theories.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

View More Free Quizzes
Related BrainMass Solutions

  • Calculating Cash Collections

    This explaisn the ways of Calculating Cash Collections and other concepts

  • Discussion of Float

    In general, a firm's disbursement activities and its collection activities generate float D. A firms float is negative when its available balance equals its book balance E.

  • Which of the following is most correct?

    E) A firm which has such a efficient cash management system that it has positive net float can have a negative checkbook balance at most times and still not have its checks bounce.

  • Calculating Float, Net Float, Cash Discounts

    Does this create a disbursement float or a collection float? b. What is your available balance? c. Book balance? 6. Calculating Net Float.

  • Float for a check deposit.



    Since a check is deposited this creates a collection float for the depositor in the amount of $110,000.

    But the bank does not add this deposited amount to your cash balance until it is cleared.

  • Working Capital: Cash, Ledger and Available Balances

    If all of a firm's deposits consist of checks and all of its withdrawals are made in cash, then the firm's available balance will exceed its ledger balance. c.

  • Cash management and credit management techniques

    Efficient managing cash flows within the firm, ? Financing deficit or investing surplus cash and thus, controlling cash balance at a point of time.

  • Ledger balance with the bank and the net float.

    Because the company has not yet received the cash from the check deposited at the end of the month, the company's net float equals $60,000 - $45,000 or $15,000. This posting gives the solution to the student's question.

  • Finance Problems

    f) Looking at the balance sheet, name a use of cash from 2005 to 2006. In other words, what was a change that consumed cash? Please see the attached file. 1.

View More Related Solutions