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Understanding the Basics of Credit

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Questions and Answers

Credit is based on

The debtor's ability to pay in the future

The creditor's confidence in the debtor (correct)

The creditor's financial status

The debtor's willingness to borrow

Who has the power to accept or reject credit?

The lender

The debtor

The borrower

The creditor (correct)

When credit is accepted, what is created?

Obligation (correct)

Payment

Debt

Confidence

What does the obverse side of the coin represent in the credit system?

Credit (B) Signup and view all the answers

Why is it important to understand the credit system?

To recognize credit (B) Signup and view all the answers

What is the nature of credit and how does it depend on the debtor's ability to pay?

Credit is based on the confidence in the debtor's ability to pay in the future. Signup and view all the answers

Who are the parties involved in a credit transaction and what happens to credit and debt?

The parties involved are the creditor and the debtor. Credit and debt are simultaneously created and destroyed. Signup and view all the answers

How can the relationship between credit and debt be portrayed?

The relationship can be portrayed as the two sides of a coin, where the obverse represents credit and the reverse represents debt. Signup and view all the answers

What is the significance of understanding the credit system?

Understanding the credit system is important to comprehend the nature of credit and its implications. Signup and view all the answers

Can credit be given away? Explain.

No, credit cannot be given away as it needs to be appraised and recognized by the lender before acceptance. Signup and view all the answers