Cash reserve definition
What is the definition of "cash reserve"?
For a business, a cash reserve is the money available to fund expenses beyond what the operating cash flows provide for a period of time. For example, a business may plan to have a 90-day cash reserve. Think of it as a rainy day fund.
In residential real estate mortgage terms, a cash reserve is an amount that a borrower has available after paying all transaction costs at closing (down payment, closing costs, prepaid expenses, etc.). Some lenders require that a mortgagor have a reserve adequate to pay at least two mortgage payments.
In banking terms, the cash reserve (cash reserve ratio) for banks is the amount of cash or liquid assets that a bank must maintain by regulation. In the U.S. that reserve is 10% of the amount of bank deposits and notes.
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