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# Cash balance/ float concepts

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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?

#### 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 ...

#### Solution Summary

A paragraph explains each question. No references.

\$2.19