Question 11.7: Consider the same company as in Examples 11.5 and 11.6. Give...

Analytical Corporate Finance

Consider the same company as in Examples 11.5 and 11.6. Given the collection float and the disbursement float calculated before, we can calculate the net float as:

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F_{net} =F_{dis} +F_{cll} =50,000-75,000=-25,000  €

The size of the float depends on the amount of cash involved in the transactions, and the days that occur between the book change and the bank account change. Float can be measured as a daily average, as:

F_{AD} =\frac{F_{€,i} D_{i} +F_{€,j} D_{j} +…+F_{€,n} D_{n} }{D_{i} +D_{j} +…+D_{n} }

where:
$F_{€,i}$ is the monetary amount of cash of float i.
$D_{i}$ is the number of days between book change and bank account change of float i.

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