COMPENSATING BALANCES Definition

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COMPENSATING BALANCES are the funds a business might be required to keep in a deposit or reserve account to help offset what the bank perceives as risk. The lender might require that an amount based on the business' average account balance or a certain percentage of the face value of the loan be maintained in a deposit account.

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UNREALIZED ACCOUNTS RECEIVABLE, in cash based accounting, is monies due but not received; can be used to offset taxes.

SUBSIDIARY is a company whose voting stock is more that 50% owned by another company.

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