What Is a Compensating Balance

question 4

Multiple Choice

What is a compensating balance?

• A)reclassification of a cash amount that is restricted from use in the current operating cycle
• B)negative cash balance that occurs when a company writes a check in an amount that exceeds the account balance
• C)short-term liquid investment with original maturity of three months or less
• D)minimum cash balance required to be maintained by a credit agreement

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Definitions:

Government Authority

The legal and formal right given to officials or bodies to make decisions, enforce laws, and administer public resources.

Civil Disobedience

The refusal to comply with certain laws or to pay taxes and fines, as a peaceful form of political protest.

Nonviolent Refusal

The act of saying no or resisting in a peaceful manner, without resorting to physical force.

Judicial Branch

The branch of government responsible for interpreting the law and administering justice through courts and legal systems.