Question: Compensating balances: A. are ordered monthly (or quarterly) following forecasts based on cash budget analysis to compensate for shortfalls B. require a commitment fee C.

Compensating balances:

A. are ordered monthly (or quarterly) following forecasts based on cash budget analysis to compensate for shortfalls

B. require a commitment fee

C. earn high rates of interest for the firm

D. are used to finance inventories

E. increase the effective interest earned by banks on credit lines

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