If a company has made arrangements with a bank to borrow money in the months when they have a negative cash balance, this arrangement is a
A) bank overdraft.
B) demand loan.
C) long-term loan.
D) term deposit.

Question

Quizplus · Accepted Answer

A bank overdraft is a short-term loan arrangement between a company and a bank, where the company is allowed to withdraw more money from their account than they have available. This is useful for companies that have fluctuating cash flows and may experience occasional negative balances. The interest is usually higher than a traditional loan, but the company is only charged for the amount borrowed and for the amount of time the overdraft is outstanding.

If a Company Has Made Arrangements with a Bank to Borrow