Banks Often Require Borrowers to Maintain an Average Amount in Their

question 2

Multiple Choice

Banks often require borrowers to maintain an average amount in their checking accounts as a requirement of getting a loan. This is known as:

• A) a general line of credit.
• B) guaranteed credit.
• C) commercial paper.
• D) a compensating balance.
• E) a pledged receivable.

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Definitions:

Net Cash Flow

The difference between cash inflows and outflows from operational, investing, and financing activities during a specific period.

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation and a claim on part of the corporation's profits.

Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.

Net Cash Flow

The amount of cash generated or lost over a specific period, considering cash inflows and outflows.