A Compensating Balance: I.is Required When a Firm Acquires Any Bank Financing Other

question 14

Multiple Choice

A compensating balance:
I.is required when a firm acquires any bank financing other than a line of credit.
II.increases the cost of short-term bank financing.
III.may be required even if a firm never borrows funds.
IV.is often used as a means of paying for banking services received.

• A)I and III only
• B)II and IV only
• C)II and III only
• D)I and IV only
• E)II, III, and IV only

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