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Questions and Answers
What is the fundamental element of credit according to the text?
How is credit distinguished from debt based on the text?
Who is a debtor according to the text?
Which of the following entities could be a creditor?
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What is a basic element of credit according to the text?
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Which of the following is NOT classified as a user of credit in the text?
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What does 'Capital' refer to in the 5 C's of Credit?
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Which type of credit is used to finance the production and marketing of agricultural products?
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What is the economic function of credit mentioned in the text?
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What does 'Collateral' refer to in the context of credit according to the text?
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Study Notes
Credit Fundamentals
- The fundamental element of credit is trust, which is the confidence that the borrower will repay the loan.
- Credit is distinguished from debt in that credit involves the ability to borrow, whereas debt is the actual amount borrowed.
- A debtor is an individual or entity that borrows money or owes a debt.
Credit Entities
- A creditor is an individual or entity that lends money or extends credit.
Credit Elements
- A basic element of credit is the ability to repay the loan.
Credit Users
- The following are NOT classified as users of credit: individuals who save money.
5 C's of Credit
- 'Capital' refers to the borrower's wealth or assets.
Agricultural Credit
- Agricultural credit is used to finance the production and marketing of agricultural products.
Economic Function of Credit
- The economic function of credit is to facilitate the exchange of goods and services by enabling the transfer of purchasing power from one party to another.
Collateral
- 'Collateral' refers to assets or properties that are pledged as security for a loan.
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Description
Explore the concept of credit, including the ability to obtain goods/services now and pay for them later, as well as the meaning of credit originating from the Latin word 'credo' meaning to believe or trust. Learn about the obligations and rights created for both debtors and creditors in transactions involving the transfer of goods, services, funds, property, and more.
