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Compensating Balances Are Frequently a Part of Revolving Lending Arrangements

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Essay

Compensating balances are frequently a part of revolving lending arrangements with banks,yet they add to the cost of financing for the borrower. Why,then,would borrowers agree to such terms?
What other types of financing are there that the firm could use as an alternative?


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Property Rights

Property rights are the legally recognized rights to own, utilize, and dispose of assets or property, which can include both physical and intellectual property.

Interfering

The act of impeding or meddling in the affairs or processes of others, potentially causing disruption or hindrance.

Choice Decisions

The cognitive process of selecting among multiple options or actions in various contexts.

Government Intervention

The active involvement of a government in the economic, social, or political matters of a country, typically to correct market failures or promote social welfare.

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