Which of the following is true regarding float?

A) Cheques written by a firm generate collection float.
B) Cheques received by a firm create disbursement float.
C) In general, a firm's disbursement activities and its collection activities generate float.
D) A firm's float is negative when its available balance equals its book balance.
E) A firm cannot exploit float by using the cash needed to cover a cheque that has not yet cleared.

Disbursement Float

The amount of time it takes for money to be withdrawn from one account and cleared in another, affecting the available balance.

Collection Float

The time period between when a check is deposited into a bank account and the time the funds are available and officially credited to the account.

Book Balance

refers to the current balance in a company’s accounting records, not including any pending transactions that have not yet been cleared or settled.