Podcast
Questions and Answers
What is the main objective of credit policies within a company?
What is the main objective of credit policies within a company?
To maximize profits and minimize bad debts.
Increased staff turnover is an advantage of written credit policies.
Increased staff turnover is an advantage of written credit policies.
False
Personal opinions of employees are included when developing credit policies.
Personal opinions of employees are included when developing credit policies.
False
Seller over-extension is a factor that influences restrictive credit policies.
Seller over-extension is a factor that influences restrictive credit policies.
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Checking orders for credit is one of the routine functions performed by credit personnel?
Checking orders for credit is one of the routine functions performed by credit personnel?
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In credit procedures, the credit risk is primarily evaluated during what process?
In credit procedures, the credit risk is primarily evaluated during what process?
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The main objective of credit policies within a company is to maximize profits and minimize bad debts.
The main objective of credit policies within a company is to maximize profits and minimize bad debts.
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Increased staff turnover is NOT listed as an advantage of written credit policies.
Increased staff turnover is NOT listed as an advantage of written credit policies.
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Personal opinions of employees is NOT included when developing credit policies.
Personal opinions of employees is NOT included when developing credit policies.
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In credit procedures, the credit risk is primarily evaluated during the credit granting process.
In credit procedures, the credit risk is primarily evaluated during the credit granting process.
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The ideal balance for a company's credit policy is between liberal and restrictive?
The ideal balance for a company's credit policy is between liberal and restrictive?
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A key task of a credit manager is handling special collection problems.
A key task of a credit manager is handling special collection problems.
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Effective communication of credit policies is essential for ensuring compliance and understanding.
Effective communication of credit policies is essential for ensuring compliance and understanding.
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A good credit policy encompasses basic company objectives of maximizing sales and reducing losses due to bad debts.
A good credit policy encompasses basic company objectives of maximizing sales and reducing losses due to bad debts.
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The primary responsibility of a collector is to contact delinquent customers.
The primary responsibility of a collector is to contact delinquent customers.
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Physical strength is NOT emphasized as important for a collector.
Physical strength is NOT emphasized as important for a collector.
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It is advantageous for a collector to have a pleasant personality because it creates a positive atmosphere conducive to collection.
It is advantageous for a collector to have a pleasant personality because it creates a positive atmosphere conducive to collection.
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Flag their files and send a reminder letter to the one who signs checks is one method to handle a "careless" customer according.
Flag their files and send a reminder letter to the one who signs checks is one method to handle a "careless" customer according.
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A collector must provide leniency and understanding in dealing with a financially distressed customer.
A collector must provide leniency and understanding in dealing with a financially distressed customer.
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Participation in outside training courses is one suggested approach to improve a collector's skills.
Participation in outside training courses is one suggested approach to improve a collector's skills.
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The role of a collector is critical in a business because they need to ensure that cash inflow is continuous for smooth operation.
The role of a collector is critical in a business because they need to ensure that cash inflow is continuous for smooth operation.
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Collectors should have an adequate academic background to prepare for higher positions in the organization.
Collectors should have an adequate academic background to prepare for higher positions in the organization.
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Perennial discounter type of customers requires the collector to be particularly firm.
Perennial discounter type of customers requires the collector to be particularly firm.
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Focusing too much on selling can lead to a business's failure in terms of collection policies.
Focusing too much on selling can lead to a business's failure in terms of collection policies.
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Credit analysis evaluates key financial elements of a company such as assets, liabilties, and equity.
Credit analysis evaluates key financial elements of a company such as assets, liabilties, and equity.
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Financial ratios important in credit analysis because they measure the company's performance efficiency.
Financial ratios important in credit analysis because they measure the company's performance efficiency.
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"Capacity to pay" is considered the most critical factor in credit evaluation because it assesses the borrower's cash inflows and ability to repay.
"Capacity to pay" is considered the most critical factor in credit evaluation because it assesses the borrower's cash inflows and ability to repay.
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Conditions influence credit decisions by analyzing the external environment and loan purpose.
Conditions influence credit decisions by analyzing the external environment and loan purpose.
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Historically, character was most emphasized in credit granting.
Historically, character was most emphasized in credit granting.
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Credit history critical in financial decisions because it determines a borrower's likelihood of repayment.
Credit history critical in financial decisions because it determines a borrower's likelihood of repayment.
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The Five C's of Credit aim to evaluate collectively a borrower's ability and willingness to repay debts.
The Five C's of Credit aim to evaluate collectively a borrower's ability and willingness to repay debts.
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Capacity evaluates cash inflows, while collateral secures loans with assets.
Capacity evaluates cash inflows, while collateral secures loans with assets.
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It is important to have low debt-to-credit ratios because it increases the likelihood of loan approval.
It is important to have low debt-to-credit ratios because it increases the likelihood of loan approval.
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If a borrower defaults on their loan, collateral is the "second way out for lenders.
If a borrower defaults on their loan, collateral is the "second way out for lenders.
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A borrower demonstrate character in credit evaluations by having a strong repayment history.
A borrower demonstrate character in credit evaluations by having a strong repayment history.
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The primary purpose of a credit and collection policy is to document steps for managing credit and collections.
The primary purpose of a credit and collection policy is to document steps for managing credit and collections.
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Guaranteeing a profit margin is NOT a benefit of having a well-written credit and collection policy.
Guaranteeing a profit margin is NOT a benefit of having a well-written credit and collection policy.
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To ensure consistency and efficiency in collections is the main benefit of documenting steps and communication in a credit policy.
To ensure consistency and efficiency in collections is the main benefit of documenting steps and communication in a credit policy.
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Evaluating credit risk is the core function of credit granting.
Evaluating credit risk is the core function of credit granting.
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Updating credit information is considered vital because it allows for better customer relations.
Updating credit information is considered vital because it allows for better customer relations.
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Credit application and interview is the first step in the operations of credit procedures.
Credit application and interview is the first step in the operations of credit procedures.
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The "purpose" section of a credit and collection policy include basic governance framework of the policy.
The "purpose" section of a credit and collection policy include basic governance framework of the policy.
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Customers' anticipated purchasing volume is a key consideration when setting credit limits.
Customers' anticipated purchasing volume is a key consideration when setting credit limits.
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Credit and collection policy must be updated routinely to adapt to changing market conditions.
Credit and collection policy must be updated routinely to adapt to changing market conditions.
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The primary purpose of the Credit Information Corporation (CIC) is to collect and disseminate credit information.
The primary purpose of the Credit Information Corporation (CIC) is to collect and disseminate credit information.
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To provide loans to borrowers with poor credit histories is NOT a function of the CIC.
To provide loans to borrowers with poor credit histories is NOT a function of the CIC.
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Borrowers have the right to access and dispute information in their credit reports.
Borrowers have the right to access and dispute information in their credit reports.
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Under RA 9510, authorized entities can access credit information for specific purposes.
Under RA 9510, authorized entities can access credit information for specific purposes.
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Threatening actions that are not legally permissible is a prohibited debt collection practice.
Threatening actions that are not legally permissible is a prohibited debt collection practice.
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Publishing personal information about a borrower's debt allowed if the borrower provides written consent.
Publishing personal information about a borrower's debt allowed if the borrower provides written consent.
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Lending companies must outsource debt collection to third-party agencies when they ensure the agencies comply with the law.
Lending companies must outsource debt collection to third-party agencies when they ensure the agencies comply with the law.
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Severe violations of debt collection rules may result in revocation of the company's authority to operate.
Severe violations of debt collection rules may result in revocation of the company's authority to operate.
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It is not true that credit policies are exclusively the responsibility of the credit manager within a company.
It is not true that credit policies are exclusively the responsibility of the credit manager within a company.
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Written credit policies are generally preferred over unwritten ones due to their distinct advantages.
Written credit policies are generally preferred over unwritten ones due to their distinct advantages.
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It is not true that the internal situation of a company has little effect on the reliability of its credit policies.
It is not true that the internal situation of a company has little effect on the reliability of its credit policies.
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It is not true that a good credit policy should be implemented without any assignment of responsibilities.
It is not true that a good credit policy should be implemented without any assignment of responsibilities.
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Policies should be monitored closely and revised to suit current situations.
Policies should be monitored closely and revised to suit current situations.
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The ideal credit policy varies significantly from one industry to another.
The ideal credit policy varies significantly from one industry to another.
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Character refers to the general impression the customer makes on the lender, including their trustworthiness and business experience.
Character refers to the general impression the customer makes on the lender, including their trustworthiness and business experience.
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Lenders consider collateral as a secondary repayment source in case the borrower defaults on the loan.
Lenders consider collateral as a secondary repayment source in case the borrower defaults on the loan.
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Capital represents the money personally invested in the business by the borrower, demonstrating their commitment to the business.
Capital represents the money personally invested in the business by the borrower, demonstrating their commitment to the business.
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Historical perspectives indicate that character was once considered the most critical factor in credit decisions.
Historical perspectives indicate that character was once considered the most critical factor in credit decisions.
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It is not true that the credit evaluator's judgment relies solely on the numerical data provided in the credit application.
It is not true that the credit evaluator's judgment relies solely on the numerical data provided in the credit application.
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Payment history on existing credit relationships is an indicator of future payment performance.
Payment history on existing credit relationships is an indicator of future payment performance.
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Study Notes
Credit Policies and Practices
- The main goal of credit policies is to maximize profits and minimize bad debts.
- Increased staff turnover is NOT an advantage of written credit policies.
- Personal opinions of employees are not included in developing credit policies.
- Seller over-extension is a factor affecting restrictive credit policies.
- Credit risk assessment is mainly during the credit granting process.
- A good credit policy balances liberal and restrictive measures, maximizing sales and minimizing losses.
- Credit manager's role is critical in handling special collection issues.
- Effective communication of credit policies is crucial for compliance.
- Collector's primary responsibility is contacting delinquent customers.
- Pleasant personality and communication style is beneficial for collectors.
- Reminder letters for "careless" customers is an effective collection method.
- Collectors should show empathy and understanding.
- Training courses improve collector skills.
- Collector role is vital for maintaining cash flow.
- Collectors need good academic background and experience.
- Dealing with "difficult" customers requires firmness.
- Excessive focus on sales can hinder collection efficiency.
- Credit analysis checks a company's assets, liabilities, and equity.
- Financial ratios measure company performance and efficiency.
- "Capacity to pay" is fundamental for credit evaluation.
- Credit decisions are influenced by external conditions and loan purpose.
- Credit history impacts repayment likelihood.
- Five C's of Credit (Capacity, Capital, Conditions, Collateral, Character) evaluate borrower's ability and willingness to repay.
- Capacity involves assessing cash inflows, while collateral secures loans.
- Low debt-to-credit ratios improve loan approval chances.
- Strong repayment history demonstrates a borrower's character.
- Credit and collection policies document steps for managing credit and collections.
- Profit margin is NOT a benefit of well-written credit policies.
- Effective communication and documentation are vital for collection success.
- Assessing credit risk is essential for credit granting.
- Accurate credit information enhances customer relations.
- Credit application procedures are the first step in credit operations.
- Credit policies should adapt to changing market conditions.
- Credit Information Corporation (CIC) collects and disseminates credit information.
- Loan provision for poor credit history is NOT a CIC function.
- Borrowers can access and dispute their credit reports.
- Credit information access is lawful for specific purposes.
- Credit policies are generally preferred over unwritten ones.
- Internal company factors affect credit policies.
- Policies must be reviewed and adjusted for current conditions.
- Customer's overall impression (character) is important for lenders.
- Collateral is a secondary repayment source.
- Capital is the borrower's invested money in the business.
- Historical perspectives indicate character as a crucial factor in credit decisions.
- Credit evaluation relies on numerical data and payment history.
- Payment history reflects future payment performance.
Debt Collection
- Debt collection is outsourced to third-party agencies if they follow the law.
- Severe violations result in revoked company authority.
- Credit policies are not solely a credit manager's responsibility.
- Written policies are more advantageous than unwritten ones.
- Internal company situations impact credit policy reliability.
- Policies must include clear roles and responsibilities for implementation.
- Credit policies need consistent monitoring and adjustments.
- Credit policies vary based on the industry.
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Description
Explore the essential components of credit policies and practices in this quiz. Understand the roles of credit managers and collectors, the importance of effective communication, and how to balance credit risks with sales maximization. Test your knowledge on strategies to minimize bad debts and ensure compliance.
