Question

Disbursements float: A) occurs when a deposit is recorded but the funds are unavailable. B) causes the book balance to exceed the bank balance. C) has tended to decrease the net float of the firm D) is a recommended source of funds for short-term investments. E) is generally more desirable to companies than collection float.

Answer 1

Answer:

The correct answer is letter "E": is generally more desirable to companies than collection float.

Explanation:

Disbursement floats refer to the amount of money a company has spent but has not been discounted from its account yet. This usually happens when the company makes wire transfers to different banks or issues checks that take to clear some days.  

Disbursement floats are preferred for a company compared to collection float since the latter is based on debts that the firm has not been able to pay yet while disbursement floats are just the result of unfinished transactions the company has already taken responsibility for.

Answer 2

Answer: The correct answer is E) is generally more desirable to companies than collection float.

Explanation: Disbursement float refers to money spent but has not been taken out from the bank account. They include checks yet to be presented by the suppliers.

Collection floats on the other hand refers to deposits on bank accounts that has not yet cleared.

In business, disbursement floats are preferred to collection floats as they present additional money in the bank account for one or more days. As such, a company aims to increase disbursement float and decrease collection float.