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What is definition of a cash float in accounting?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 preetham asked almost 3 years ago

Hi friends, What is meant by cash float in accounting?Can you explain about that.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

Cash float is the time between when you authorize a bank to disperse funds from your bank account and when it actually leaves your account. If you're in a position where you must pay to create something before you sell it and your customer pays you 45 days later, then you have 45 days where you have spent money that you aren't getting back. This is called "cash float." If your business is steady, your float is equal to two or three months of income. For example, if your company makes $120,000 each year ($10,000 per month)

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Open uri20170510 32134 1uwcnoc?1494421631 Shubhangi Jain answered almost 3 years ago

Cash float is the time between when you authorize a bank to disperse funds from your bank account and when it actually leaves your account. If you're in a position where you must pay to create something before you sell it and your customer pays you 45 days later, then you have 45 days where you have spent money that you aren't getting back. This is called "cash float." If your business is steady, your float is equal to two or three months of income. For example, if your company makes $120,000 each year ($10,000 per month), the cash float is probably $20,000 to $30,000. When success comes your way and sales increase from $240,000 to $1.2 million per year, your float also increases from $40,000+ to $200,000+, and that money has to come from somewhere. Part of it can come from profit, but unless your profits are extremely high, they are probably insufficient to enable such growth.

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