are all of these (book balnces ,availble balances , Net float) are needed to be more...

are all of these (book balnces ,availble balances , Net float) are needed to be more concerned as a financial manager ? or none of them ? explain

Expert Solution

The book balance represents the actual money the company may use to spend.

If the available balance of the company is less than the book balance, then the firm is said to have net collection float. The total of collection and disbursement floats is the net float.

Difference between the firm’s available balance and its book balance is also net float. If the net float is positive, then the firm’s disbursement float will be more than the collection float, and the available balance will be more than the book balance. If the available balance is less than the book balance, then the firm is said to have a net collection float.

If a financial manager knows that several days will be taken to clear a cheque issued by the company, then the manager will be able to keep lower cash balance at the bank than might be possible otherwise. This will be able to generate a great deal of money. Thus the financial manager of a firm should be concerned about its net float and available balance than the book balance.

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