Compensating Balances Are Often Included as a Requirement for a Line

question 92

Essay

Compensating balances are often included as a requirement for a line of credit.These balances provide income to banks but add to the cost of financing for the borrower.Why,then,would borrowers agree to such an arrangement?

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Definitions:

Xiphoid Process

The small, cartilaginous projection at the lower end of the sternum, which can become ossified in adults.

Aortic Pulsations

The rhythmic expansion and contraction felt over the aorta, reflecting the heartbeat and blood flow.

Peristalsis

The coordinated, rhythmic contractions of smooth muscle that occur in the digestive tract to move food and waste products through the body.

Scaphoid Abdomen

A medical term describing a abdomen that appears sunken or hollowed out, often signifying undernutrition or certain diseases.