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Article
The Cost of Float: Commercial Banking Treasury Management Analysis Case Study
International Research Journal of Applied Finance 2015 (2015)
  • Patricia R Robertson, Kennesaw State University
Abstract

Abstract - This case is ideal for an upper-level finance course that has an emphasis on short-term financial management. Despite significant advancements in electronic payment systems, most U.S. firms continue to pay invoices with paper checks mailed to suppliers. So long as the checks are received by the due date, firms are in compliance with supplier credit terms. However, paper checks must be processed and recorded by the supplier, deposited in the supplier’s bank, and cleared against the payer’s bank before the cash is transferred from the payer’s checking account to the supplier’s checking account. This delay in the conversion of a check to cash is known as float and has a cost to the receiver of a check.

This case includes elements to measure and quantify the cost of float from the perspective of the receiver of a check using time value of money principles. In addition, the case includes an analysis on how services provided through the Treasury Management divisions of commercial banks can shorten float time and enhance the value of the firm’s operating activities.

The case can be used to supplement the course curriculum or as a stand-alone assignment. It can be offered as an individual or as a team-based project.

Publication Date
Winter January, 2015
Citation Information
Patricia R Robertson. "The Cost of Float: Commercial Banking Treasury Management Analysis Case Study" International Research Journal of Applied Finance 2015 Vol. 4 (2015)
Available at: http://works.bepress.com/patricia_robertson/3/