What is a compensating balance?
A) short-term investments with original maturities that are less than one year
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

Question

Quizplus · Accepted Answer

A compensating balance is a minimum cash balance that a borrower is required to maintain in a bank account as part of a credit agreement with a lender.

What Is a Compensating Balance