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Credit And Collection > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

is defined as prudence or sagacity in the conduct of affairs

A

policy

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2
Q

prudence means

A

sound judgement

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3
Q

sagacity means

A

shrewdness

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4
Q

are general statements used as guides for the members of an organization as they perform their jobs

A

policies

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5
Q

it provides guidelines on routine and repetitious tasks

A

policies

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6
Q

policies are designed or set at various levels

A

strategic policies at the top management level
tactical policies at the middle management level
operational policies for the rank and file

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7
Q

it reflect the objectives and management philosopy of the organization

A

policies

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8
Q

are proposed by the credit department, then later approved by the BOD who may delegate this function to a credit committee or the company president

A

credit policies

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9
Q

They are revised from time to time and the inputs of branches or district officers are sometimes taken into consideration.

A

credit policies

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10
Q

the decision to produce a written policy manual would depend on

A

Financial resources of the company
philosophy of the management
organizational size and structure
complexity of credit transactions
approval limits

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11
Q

Some of the areas where general policies have to be designed are

A

approval authority
credit limits
loan to market value ratios
past due limits
territorial limits
single proprietor vs. corporation
other side agreements imposed by lender
separations of credit from marketing operations

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12
Q

the approval authority to approve could either be

A

geographical or based on rank or title

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13
Q

in geographical how much is the amount of loan then who will approve it

A

Over 500k head office
200k to 499999 regional office
50k to 199999 branch or district office

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14
Q

if based on rank or title how much is the amount of loan and who will approve

A

Over 500k president
200k to 499,999 vice president
50k to 199,999 loan officer

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15
Q

Is the maximum amount of credit that could be granted to one borrower

A

credit limits

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16
Q

example of credit limits

A

single borrower rule in a bank

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17
Q

Credit limit should be

A

sound and practical

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18
Q

in secured loans, this represents the maximum loan that could be granted to a borrower based on the propertys market value

A

loan to market valie ratios

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19
Q

this limit is imposed as a performance measurement tool of branches or of the credit and collection department

A

past due limits

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20
Q

it coulsd be the basis for the promotability of employees

A

past due limits

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21
Q

it is also used in the collection incentive progran

A

past due limits

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22
Q

the past due limit of banks

A

25%

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23
Q

is privilege whereby banks who are low on funds may borrow from the bangko sentral using their own loans as collateral

A

re-discounting

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24
Q

Areas where credit could be granted are clearly identified based on geographical limits

A

territorial limits

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25
Q

Some of the factors used in delineating territorial limits are

A

Peace and order situation particularly in provinces where insurgents are active
availability of regular public transport facilities prevalence of crime
travel time
road conditions

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26
Q

The main issue here is liability

A

single proprietorship vs corporation

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27
Q

Is single proprietorship has,,, while corporation has

A

unlimited liability limited liability

28
Q

This means that if an entrepreneur uses a single proprietorship as the type of legal organization for his business and he incurs a liability and excess of his business resources he is still liable to the extent of all his personal assets present and future

A

unlimited liability

29
Q

the other common conditions imposed by lenders are

A

compensating balance
annual clean-ups
submission of regular periodic financial statements
exclusive marketing agreement
exclusive warehousing and transport agreement assurance of quick response repair services

30
Q

some banks require that their borrowers should maintain a balance in their bank equivalent to 10% of the loan

A

compensating balance

31
Q

in some types pf loans, banks require their borrowers to pay all unpaid loans at least once a year this tests the borrowers financial capacity

A

annual clean-ups

32
Q

merchandise credit is granted provided that the buyer will sell and carry in its inventory, on an exclusive basis, only the products of the creditor-supplier

A

exclusive marketing agreement

33
Q

This is required by lenders who have interest in warehouses and transportation facilities

A

Exclusive warehousing and transport agreement

34
Q

Landers for car financing would like to make sure that when there are car breakdown the dealer has complete service facilities

A

Assurance of quick response repair services

35
Q

It is this department sole responsibility is to make sure that credit resources are used properly no credit sales should be allowed to unworthy customers

A

Credit department

36
Q

Some of the terms that may be used in loan payment terms

A

Pay on demand
Payment required immediately after the occurence
Payment required when merchandise is sold
Payment with specific due dates

37
Q

Arrangements that fall in paymemt required after mechandise is sold

A

Consignment only
trust receipt

38
Q

the receiver of the goods held in trust

A

entrustee

39
Q

owner of the goods

A

entrustor

40
Q

Kinds of payment with certain due date

A
  1. due dates in calendar days
  2. fixed one year with renewal
  3. payments after availments
  4. interest only, and ballon payment at end of term
  5. amortized payments of equal amounts
  6. graduated payment schemes
  7. decreasing payment schemes
  8. acceleration clause
41
Q

this applies to a line of credit and a revolving credit agreement

A

payments after availments

42
Q

the principal payment is a large lump-sum payment and is called

A

balloon

43
Q

a large lump sum payment at any time, either at the end of the credit term, or during the term

A

balloon payment

44
Q

this payment scheme provides for equal periodic payments of equal amounts

A

amortized

45
Q

is really an amortized type of credit

A

installment payment scheme

46
Q

monthly payments are popularly called

A

installments

47
Q

payments on medium term and long term bank loans are called

A

amortizations

48
Q

this payment set up is popular in home mortgages, particularly to applicants who just graduated from college and are just starting out

A

graduated payment scheme

49
Q

this is a very rare payment plan and is the exact opposite of the graduated payment scheme

A

decreasing payment scheme

50
Q

this scheme is appropriate for individuals who are at the peak of their career or who are currently experiencing financial success

A

decreasing payment scheme

51
Q

several factors to be taken into account in determining the term to be used

A

nature of the product
the sellers mark up on the product
the loan value vs market value
the terms used by competitors

52
Q

this particularly applies in cash loans secured by real estate property

A

the loan value vs market value

53
Q

this is a provision in an installment contract which accelerates the due date of the loan or credit in case of non payment of some periodic payments

A

use of acceleration clause

54
Q

kinds of interest

A

simple and compound

55
Q

interest used in various kinds of credit have different modes and are calculated in many different ways

A

simple interest
add on interest rate
compound interest-amortized
fixed rate and variable rate

56
Q

this is popular in appliance or installment credits and consumer loans

A

add-on interest rate

57
Q

is the rate charged by banks to its prime, or its best, clients

A

prime rate

58
Q

6C’s od credit

A

character
capacity
capital
collateral
conditions
cash flow

59
Q

the first and the most important C

A

character

60
Q

are the favtors to be considered in approving or disapproving a ctedit application

A

credit criteria

61
Q

refers to a persons attitude towards credit, which excludes many other things

A

credit character

62
Q

refers to his mental disposition and his personal values in relation to credit commitments

A

credit character

63
Q

if the applicant does not have a credit history, how will the evaluator judge his character

A

applicants attachment to community, job or business, to the thing purchased

64
Q

this refers to the applicants sense of belonging in a community

A

attachment to the community

65
Q

this refers to a borrowers resources

A

capital

66
Q

tjis refers to personal and real properties that are used to secure a credit obligation

A

collateral

Credit And Collection (7 decks)

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