Which best describes why firms maintain float?
A)Float refers to the difference between the firm's available or collected balance at its bank and the firm's net income statement.
B)Float refers to the difference between the firm's available or collected balance at its bank and the firm's balance sheet.
C)Float refers to the difference between the firm's available or collected balance at its bank and the firm's book, or ledger, balance
D)Float refers to the difference between the firm's available or collected accounts receivable balance at its bank and the firm's book, or ledger, balance.

Question

Quizplus · Accepted Answer

Float refers to the difference between the firm's available or collected balance at its bank and the firm's book, or ledger, balance. Firms maintain float to allow for time lags in processing payments and to have funds available for unexpected expenses. By keeping some funds in float, firms can have greater financial flexibility and avoid potential cash flow problems.

Which Best Describes Why Firms Maintain Float