What is Float?

In finance, float refers to the difference between the balance shown in a company’s bank account and the actual amount of money available in the account. The term “float” is often used to describe the time delay between when a payment is made and when it is actually processed and cleared by the bank.

For example, when a company writes a check, there is typically a delay between the time when the check is written and when the funds are actually withdrawn from the company’s bank account. During this time, the funds are said to be “in float,” meaning that they are still available for use by the company.

Float can be both positive and negative, depending on the timing of incoming and outgoing funds. A positive float occurs when a company’s account balance is greater than the actual amount of funds available, while a negative float occurs when the account balance is less than the actual amount of funds available.

Managing float can be important for companies, as it can affect their cash flow and overall financial stability. By monitoring and managing float, companies can ensure that they have sufficient funds available to meet their financial obligations, while also maximizing the use of their cash resources.

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