The unused portion of a line of credit:
A)Is reported as a current liability in the balance sheet.
B)Decreases a company's liquidity.
C)Can be used at any time by drawing a check on a special bank account.
D)Requires a compensating balance in order to keep the line of credit open.

Question

Quizplus · Accepted Answer

The unused portion of a line of credit can be accessed at any time by drawing a check on a special bank account. It is not reported as a liability and does not decrease a company's liquidity. A compensating balance may be required by some lenders to keep the line of credit open, but this is not always the case.

The Unused Portion of a Line of Credit