Definition of Collection float

Collection float

The negative float that is created between the time when you deposit a check in your account
and the time when funds are made available.

Bank collection float

The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.

Automated Clearing House (ACH)

A collection of 32 regional electronic interbank networks used to
process transactions electronically with a guaranteed one-day bank collection float.

Net float

Sum of disbursement float and collection float.

Availability float

Checks deposited by a company that have not yet been cleared.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

Collection fractions

The percentage of a given month's sales collected during the month of sale and each
month following the month of sale.

Collection policy

Procedures followed by a firm in attempting to collect accounts receivables.

Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.

Dirty float

A system of floating exchange rates in which the government occasionally intervenes to change
the direction of the value of the country's currency.

Disbursement float

A decrease in book cash but no immediate change in bank cash, generated by checks
written by the firm.

Float

The number of shares that are actively tradable in the market, excluding shares that are held by officers
and major stakeholders that have agreements not to sell until someone else is offered the stock.

Floater

floating rate bond.

Floating exchange rate

A country's decision to allow its currency value to freely change. The currency is not
constrained by central bank intervention and does not have to maintain its relationship with another currency
in a narrow band. The currency value is determined by trading in the foreign exchange market.

Floating lien

General lien against a company's assets or against a particular class of assets.

Floating supply

The amount of securities believed to be available for immediate purchase, that is, in the
hands of dealers and investors wanting to sell.

Floating-rate contract

A guaranteed investment contract where the credit rating is tied to some variable
("floating") interest rate benchmark, such as a specific-maturity Treasury yield.

Floating-rate note (FRN)

Note whose interest payment varies with short-term interest rates.

Floating-rate payer

In an interest rate swap, the counterparty who pays a rate based on a reference rate,
usually in exchange for a fixed-rate payment

Floating-rate preferred

Preferred stock paying dividends that vary with short-term interest rates.

Free float

An exchange rate system characterized by the absence of government intervention. Also known as
clean float.

Inverse floating rate note

A variable rate security whose coupon rate increases as a benchmark interest rate declines.

In-house processing float

Refers to the time it takes the receiver of a check to process the payment and
deposit it in a bank for collection.

Mail float

Refers to the part of the collection and disbursement process where checks are trapped in the postal system.

Managed float

Also known as "dirty" float, this is a system of floating exchange rates with central bank
intervention to reduce currency fluctuations.

Payment float

Company-written checks that have not yet cleared.

Positive float

See:float.

Average Collection Period

Average number of days necessary to receive cash for the sale of
a company's products. It is calculated by dividing the value of the
accounts receivable by the average daily sales for the period.

availability float

Checks already deposited that have not yet been cleared.

collection policy

Procedures to collect and monitor receivables.

floating-rate security

Security paying dividends or interest that vary with short-term interest rates.

net float

Difference between payment float and availability float.

payment float

Checks written by a company that have not yet cleared.

Clean Float

A flexible exchange rate system in which the government does not intervene.

Dirty Float

A flexible exchange rate system in which the government intervenes.

Floating Exchange Rate

See flexible exchange rate.

Collection Department

An internal department within a company staffed by specialists in collecting past due accounts or accounts receivable.

Floating Charge

Charge or assignment on a company's total assets as security for a loan on total assets without specifying specific assets.

Floating Interest Rate

A rate that fluctuates with general market condition.

Risk of Collection

Chance that a borrower or trade debtor will not repay an obligation as promised.

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