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Unformatted text preview: zero-balance accounts, and investing in marketable
securities. Float refers to funds that have been sent
by the payer but are not yet usable funds to the
payee. The components of float are mail time, processing time, and clearing time. Float occurs in both
the average collection period and the average payment period. One technique for speeding up collections to reduce collection float is a lockbox system.
A popular technique for slowing payments to
increase payment float is controlled disbursing,
which involves strategic use of mailing points and
bank accounts. The goal for managing operating
cash is to balance the opportunity cost of nonearning
balances against the transaction cost of temporary
LG6 628 PART 5 Short-Term Financial Decisions investments. Firms commonly use depository transfer checks (DTCs), ACH transfers, and wire transfers to transfer lockbox receipts to their concentration banks quickly. Zero-balance accounts (ZBAs)
can be used to eliminate nonearning cash balances in SELF-TEST PROBLEMS corporate checking accounts. Marketable securities
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