Dictionary of Accounting Terms for: float
  1. amount of funds represented by checks that have been issued but not yet collected.
  2. time between the deposit of checks in a bank and payment. Due to the time difference, many firms are able to “play the float,” that is, to write checks against money not presently in the firm’s bank account.
  3. to issue new securities, usually through an underwriter.
Dictionary of Banking Terms for: float

dollar value of cash balances created by the time lag in processing unpaid checks. Collection float is interest that may be lost to the depositor; payment float is interest that may be gained by the payer. The largest component of float is federal reserve float, created when a Federal Reserve Bank credits the reserve account of a collecting bank before it has collected from the paying bank. Other kinds of float are mail float, caused by delays in mail handling between cities; holiday float created when a bank is not open for business due to a state or national holiday; and return item float, created when checks are returned for insufficient funds or other reasons. At greater distances between paying and receiving banks, bank clearing float tends to increase, although federal legislation enacted in 1987 requires banks to adhere to uniform funds availability on out-of-town checks, which will give banks an incentive to hold clearing float at a minimum. A bank customer’s average daily float is often calculated for purposes of account analysis.

Dictionary of Business Terms for: float

Banking: checks in transit between banks and not yet paid; checks in the process of collection that remain conditional credits in a depositor’s checking account until the checks are paid to the bank.
Securities: to sell a new issue of securities. See also flotation cost.
Insurance: the accumulation of insurance premiums collected prior to losses incurred.

Dictionary of Finance and Investment Terms for: float

Banking: time between the deposit of a check in a bank and payment. Long floats are to the advantage of checkwriters, whose money may earn interest until a check clears. They are to the disadvantage of depositors, who must wait for a check to clear before they have access to the funds. As a rule, the further away the paying bank is from the deposit bank, the longer it will take for a check to clear. Some U.S. states limit the amount of float a bank can impose on the checks of its depositors. See also uncollected funds.
Investments: number of shares of a corporation that are outstanding and available for trading by the public. A small float means the stock will be more volatile, since a large order to buy or sell shares can influence the stock’s price dramatically. A larger float means the stock will be less volatile.

Dictionary of Insurance Terms for: float

funds set aside by an insurance company to pay incurred losses which have not yet been paid.

Dictionary of Marketing Terms for: float
  1. variations in the placement of a label on a form. Float interferes with the scan entry of the information on the label since the desired information does not move in front of the scan head in a consistent manner. Float may also interfere with the deliverability of a mailing piece if the label must be seen through an envelope window. Float is usually the result of careless label application but may be created intentionally to make a mailing piece look as if a person, and not a machine, prepared it. Marketers have tested various degrees of float to identify the precise degree of individuality people respond to best. See also optical character recognition.
  2. addressing procedure that “right justifies” (aligns along the right edge) each line of copy for a neat look. See also justify.
  3. placement of a space advertisement in an area larger than necessary to accommodate the dimensions of the advertisement.
  4. money given to an advertising agency by the advertiser that may be invested or otherwise used, prior to its delivery to the media owners for which it is intended.
Dictionary of Real Estate Terms for: float
  1. the interval of time after a deposit or withdrawal is made and before the transaction is credited or deducted.
    Example: Abel writes a check to pay a debt to Baker. Baker deposits the check in a bank other than the one used by Abel. Abel’s bank may have a float of 2 or 3 days before Baker’s bank collects the money.

  2. the difference between a variable interest rate and the index to which it is pegged.
    Example: A bank makes construction loans at 3% over the prime rate. The 3% is the float.

  3. to incur a debt.
    Example: To fund a project, Atlas Company may float a loan or float a bond issue.

Copyright (c) by Barron's Educational Series. Reprinted by arrangement with the publisher of this site.