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Compensating balances: A. Are used to finance inventories B. Earn high rates of interest for the firm C. Are ordered monthly (or quarterly) following forecasts

Compensating balances: A. Are used to finance inventories B. Earn high rates of interest for the firm C. Are ordered monthly (or quarterly) following forecasts based on cash budget analysis to compensate for shortfalls D. Increase the effective interest earned by banks on credit lines E. Require a commitment fee

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