Compensating Balances Are a Restriction on the Use of a Company's

question 126

Multiple Choice

Compensating balances are a restriction on the use of a company's cash and should be

• A)reported as a current asset.
• B)reported as a noncurrent asset.
• C)disclosed in the financial statements.
• D)reported as a reduction of cash.

---

Definitions:

Common Stockholders

Owners of common shares in a corporation, who have voting rights and are entitled to dividends as declared by the company's board of directors.

Earnings Per Share

A financial ratio that indicates the portion of a company's profit allocated to each outstanding share of common stock, measuring its profitability on a per-share basis.

Profitability

The ability of a business to generate earnings compared to its expenses and other relevant costs incurred during a specific period.

Common Stockholders

Individuals or entities that own shares of a company's common stock, giving them voting rights and a share in the company's profits through dividends.