What is the average daily float

Average daily float refers to the dollar amount of checks or other negotiable instruments that are in the process of collection by a bank, financial institution, or other entity over a certain period, divided by the number of days in the period. When applied to the stock market , it can also refer to the number of company shares that are actually outstanding and available for trading on the public market on an average daily basis. Float, as defined by the Federal Reserve , is money that appears in two bank accounts at once, due to a delay in the processing of checks or the transfer of cash.

As a trading term, the average daily float is a measure of the liquid market for a company's stock. The banking term for float is most commonly applied to banks, although it can also refer to large corporations that have both checks deposited and paid checks outstanding. Some industries rely on float to make a profit.

The insurance industry, for example, uses float in this manner. Float in the insurance industry comes about because an insurance company collects premiums before paying losses, and it can hold that money for years before having to pay out on a claim.

The insurance company can, therefore, invest its float in such a way as to earn more money for the company. Average daily float is calculated by averaging the dollar value of float outstanding by the number of days of the month or other given period that amount was outstanding, then dividing it by the number of days in the period.

And it can earn interest on this float. Average daily float in the banking system as a whole increased during the s due to an increase in the use of checks, high inflation , high-interest rates, and the common practice of drawing funds from faraway banks in order to take advantage of remote disbursement, or transportation float. Portfolio Management. Personal Finance. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.

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I Accept Show Purposes. Your Money. Your Practice. Popular Courses. Personal Finance Banking. What Is Average Daily Float? Key Takeaways Float is money that appears in two bank accounts at once, due to a delay in processing. Average daily float is the dollar amount of checks or other negotiable instruments that are in the process of collection by an entity over a certain period, divided by the number of days in the period.

In the stock market, the average daily float is the number of company shares that are outstanding and available for trading on an average daily basis. Home News Blog Tools Study. Investing: The average number of shares of stock in a company that are available for trading on a given day. Average daily float is a measure of a stock's liquidity.

Stock in a closely held company will have a low average daily float and low liquidity. Banking: The total value of checks that are in the process of collection during a certain period divided by the number of days in the period.

The dollar amount of checks or other negotiable instruments that are in the process of collection over a certain period, divided by the number of days in the What is average daily float?