Question

A compensating balance is generally reported on a company's balance sheet as: A) a cash equivalent...

A compensating balance is generally reported on a company's balance sheet as:

A) a cash equivalent

B) a long-term investment

C) a short-term investment

D) a part of the total cash balance

Homework Answers

Answer #1

B) a long-term investment

Explanation:

Compensating Balance is a minimum cash balances required by lenders to support existing borrowing arrangements and/or the assurance of future credit availability.It is not available for the company to use.Restricted cash and compensating balances refers to monies that are reserved and not generally available to the company. Restricted cash can include minimum balances on bank accounts, while compensating balances include money needed to repay a loan.

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