Think about anticipated balances like those old story problems in math class, the ones where two trains leave opposing stations headed toward each other and you have to figure out where they will meet (presumably in a fiery derailment, resulting in dozens, if not hundreds, of horrendous casualties...though your math teacher never wanted to talk about that and eventually stopped calling on you).
Anticipated balances use predictable rates, along with a little math, to figure out where your bank account will be at some point in the future, much like those doomed, hypothetical trains.
The anticipated balance is the balance that an account will have at some point in the future, assuming no additional withdrawals or deposits occur. It includes the amount in the account, plus any compounded interest accumulated over the time in question. It can also include specific regular deposits, if that makes sense for the particular situation.
So you are putting money away to buy one of those tiny homes you saw on TV. You need $13,000. You have $3,000 and access to an account earning 2% a year. Using anticipated balances, you can determine how much you would need to save each month in order to get the house of your tiny dreams. (Want to know the answer? Get a calculator and figure it out. We're not your math teacher; you're on your own.)
Related or Semi-related Video
Finance: What is the Acid Test Ratio/Qui...14 Views
finance a la shmoop - what is the acid test ratio or the quick ratio quick how
liquid are we now the quick ratio is a measure of how well or not so well a [Water coming out of a tap]
company is positioned to be able to quickly pay off the bills that it owes
aka its liabilities... why the quickly in there because the assets used to pay off
the liabilities need to be quickly available assets like cash or bank CD's
or publicly traded stocks or bills the company will collect the next ninety [Assets appear]
days or so from people likely to pay them well the company likely owns other
assets like a tractor smelting company but like is it really gonna sell that [Internet mouse cursor clicks search bar]
smelter to then pay off its bill to U.S steel for steel....Ok well the actual ratio
looks like this cash plus sellable securities plus money people owe the
company divided by liabilities so basically the quick ratio compares your
total liquid assets to how much you owe and it's important to note that you [Forklift drops inventory on factory floor]
don't count your current inventory as part of your assets as it's typically
hard to sell everything you have right at this moment and then not at some huge
discount the higher the quick ratio the healthier the liquidity position of the
company another good way to test your liquidity well stand in front of a [Man showering]
radiator and see how quickly you evaporate [Girl stood by a radiator and begins to melt]
Up Next
What is paid-in-capital and capital surplus? Hit play to find out.
What is Defeasance? Defeasance is the process by which a borrower accumulates cash or other liquid assets sufficient to retire significant portions...