HRT 374 Study Guide - Final Guide: Effective Interest Rate, Petty Cash, Cash Flow

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A specific account that is for one purpose and is replenished. Banks require minimum balances to get or maintain loan. Since balance is mandatory, no interest gained, and it affects the interest rate. E. g. you always have to have ,000 in your account at all times or. Effective interest rate (compensating balance formula)= otherwise they make you pay the full loan. Annual interest on loan (prt) / loan - compensating balance requirement. E. g. hotel receives a ,000 1 -year loan @ 10% interest with a compensating balance requirement of ,000. It is possible for an operation to have profits, but have a negative cash flow * Gain or losses on sale of property & equipment. Gains or losses on sales of marketable securities. Most businesses have peaks and valleys of cash How much profit you are making on money. If it is a high risk, you want a high return.