A Compensating Balance Restricts Cash; in Effect,it Increases the Interest

question 170

True/False

A compensating balance restricts cash; in effect,it increases the interest on the loan and reduces a company's liquidity.

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Definitions:

Allowance for Doubtful Accounts

An estimation of the accounts receivable that a company does not expect to actually collect, reflecting potential losses.

Gross Amount

The total of all amounts before any deductions are made, such as taxes or discounts.

Retailer

A business that sells goods directly to consumers, typically operating out of physical stores or online platforms.

Note Receivable

An asset account on a company's balance sheet representing a promise by a debtor to pay a certain amount of money to the company in the future.