| compensating balances | Deposit that the firm keeps with the bank in a low-interest or non-interest-bearing account to compensate banks for bank loans or services.
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| concentration banking | The use of geographically dispersed collection centers to speed up the collection of accounts receivable.
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| float | The difference between bank cash and book cash. Float represents the net effect of checks in the process of collection, or clearing. Positive float means the firm's bank cash is greater than its book cash until the check's presentation. Checks written by the firm generate disbursement float, causing an immediate decrease in book cash but no change in bank cash. In neutral float position, bank cash equals book cash. Checks written by the firm represent collection float, which increases book cash immediately but does not immediately change bank cash. The sum of disbursement float and collection float is net float.
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| lockbox | Post office box set up to intercept accounts receivable payments. Lockboxes are the most widely used device to speed up collection of cash.
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| target cash balance | Optimal amount of cash for a firm to hold, considering the trade-off between the opportunity costs of holding too much cash and the trading costs of holding too little.
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| transactions motive | Areason for holding cash that arises from normal disbursement and collection activities of the firm.
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| wire transfer | An electronic transfer of funds from one bank to another that eliminates the mailing and checkclearing times associated with other cash-transfer methods.
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| zero-balance account (ZBA) | A checking account in which a zero balance is maintained by transfer of funds from a master account in an amount only large enough to cover checks presented.
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