Credit Policies and Practices

What is the main objective of credit policies within a company?

Increased staff turnover is an advantage of written credit policies.

Personal opinions of employees are included when developing credit policies.

Seller over-extension is a factor that influences restrictive credit policies.

Checking orders for credit is one of the routine functions performed by credit personnel?

In credit procedures, the credit risk is primarily evaluated during what process?

The main objective of credit policies within a company is to maximize profits and minimize bad debts.

Increased staff turnover is NOT listed as an advantage of written credit policies.

Personal opinions of employees is NOT included when developing credit policies.

In credit procedures, the credit risk is primarily evaluated during the credit granting process.

The ideal balance for a company's credit policy is between liberal and restrictive?

A key task of a credit manager is handling special collection problems.

Effective communication of credit policies is essential for ensuring compliance and understanding.

A good credit policy encompasses basic company objectives of maximizing sales and reducing losses due to bad debts.

The primary responsibility of a collector is to contact delinquent customers.

Physical strength is NOT emphasized as important for a collector.

It is advantageous for a collector to have a pleasant personality because it creates a positive atmosphere conducive to collection.

Flag their files and send a reminder letter to the one who signs checks is one method to handle a "careless" customer according.

A collector must provide leniency and understanding in dealing with a financially distressed customer.

Participation in outside training courses is one suggested approach to improve a collector's skills.

The role of a collector is critical in a business because they need to ensure that cash inflow is continuous for smooth operation.

Collectors should have an adequate academic background to prepare for higher positions in the organization.

Perennial discounter type of customers requires the collector to be particularly firm.

Focusing too much on selling can lead to a business's failure in terms of collection policies.

Credit analysis evaluates key financial elements of a company such as assets, liabilties, and equity.

Financial ratios important in credit analysis because they measure the company's performance efficiency.

"Capacity to pay" is considered the most critical factor in credit evaluation because it assesses the borrower's cash inflows and ability to repay.

Conditions influence credit decisions by analyzing the external environment and loan purpose.

Historically, character was most emphasized in credit granting.

Credit history critical in financial decisions because it determines a borrower's likelihood of repayment.

The Five C's of Credit aim to evaluate collectively a borrower's ability and willingness to repay debts.

Capacity evaluates cash inflows, while collateral secures loans with assets.

It is important to have low debt-to-credit ratios because it increases the likelihood of loan approval.

If a borrower defaults on their loan, collateral is the "second way out for lenders.

A borrower demonstrate character in credit evaluations by having a strong repayment history.

The primary purpose of a credit and collection policy is to document steps for managing credit and collections.

Guaranteeing a profit margin is NOT a benefit of having a well-written credit and collection policy.

To ensure consistency and efficiency in collections is the main benefit of documenting steps and communication in a credit policy.

Evaluating credit risk is the core function of credit granting.

Updating credit information is considered vital because it allows for better customer relations.

Credit application and interview is the first step in the operations of credit procedures.

The "purpose" section of a credit and collection policy include basic governance framework of the policy.

Customers' anticipated purchasing volume is a key consideration when setting credit limits.

Credit and collection policy must be updated routinely to adapt to changing market conditions.

The primary purpose of the Credit Information Corporation (CIC) is to collect and disseminate credit information.

To provide loans to borrowers with poor credit histories is NOT a function of the CIC.

Borrowers have the right to access and dispute information in their credit reports.

Under RA 9510, authorized entities can access credit information for specific purposes.

Threatening actions that are not legally permissible is a prohibited debt collection practice.

Publishing personal information about a borrower's debt allowed if the borrower provides written consent.

Lending companies must outsource debt collection to third-party agencies when they ensure the agencies comply with the law.

Severe violations of debt collection rules may result in revocation of the company's authority to operate.

It is not true that credit policies are exclusively the responsibility of the credit manager within a company.

Written credit policies are generally preferred over unwritten ones due to their distinct advantages.

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 a good credit policy should be implemented without any assignment of responsibilities.

Policies should be monitored closely and revised to suit current situations.

The ideal credit policy varies significantly from one industry to another.

Character refers to the general impression the customer makes on the lender, including their trustworthiness and business experience.

Lenders consider collateral as a secondary repayment source in case the borrower defaults on the loan.

Capital represents the money personally invested in the business by the borrower, demonstrating their commitment to the business.

Historical perspectives indicate that character was once considered the most critical factor in credit decisions.

It is not true that the credit evaluator's judgment relies solely on the numerical data provided in the credit application.

Payment history on existing credit relationships is an indicator of future payment performance.