PDF pending restoration
ERIC Number: ED168172
Record Type: RIE
Publication Date: 1978-Jul
Reference Count: 0
The Effect of the Minimum Compensating Cash Balance on School District Investments.
Dembowski, Frederick L.
Banks are usually reimbursed for their checking account services either by a fixed service charge or by requiring a minimum or minimum-average compensating cash balance. This paper demonstrates how to determine the optimal minimum balance for a school district to maintain in its account. It is assumed that both the bank and the school district use the Miller-Orr cash management model and that not maintaining a minimum compensating cash balance will result in charges for approximately 99 overdrafts a year. Calculations presented for a sample school district indicate that the district should not maintain a minimum compensating cash balance but should negotiate an annual fee to compensate the bank and invest the funds that previously constituted the cash balance. The paper concludes that the use of negotiated bank charges, short-term lines of credit, zero minimum checking balances, and investment of cash balances in short-term investments could result in thousands of additional dollars for school districts. (Author/JM)
Publication Type: Guides - Non-Classroom; Reports - Evaluative
Education Level: N/A
Authoring Institution: N/A
Identifiers: Miller Orr Cash Management Model
Note: Not available in paper copy due to light print of original document