Credit and Collection (Midterm) Flashcards
(6) Other Important Documents
Letter of Credit
Bill of Lading
Trust Receipts
Warehouse Receipts
Mortgage
Pledge
comes from the Latin word _____ which means TO TRUST
Credit
“Credere”
early shops were quite small and often times were located either inside or in front of the home of the owner
Retail Stores
3 Kinds of Consumer Credit
Charge Account
Installment Credit
Personal Loans
to inspect and pick out whatever they want to buy and have them check out through the cashier.
Grocery and Department Stores
It is executed by the maker who, as is logical to expect, is the debtor who promises that he will pay seller the amount owed at certain determinable time.
Promissory Notes
largely a brand-new form of retailing, its chief features consist of assembling all kinds of goods including non-food items, clothing, shoes hardware and countless others
Supermarkets
Loans granted to finance the acquisition or improvement of real estate.
Real Estate Loans
Consist of advances that have been made to a business enterprise to enable it to purchase or construct necessary plant and equipment.
Investment Credit
It is a letter used by a bank authorizing a designated individual firm or corporation to draw on it up to the total amount for which the credit is established.
Letter of Credit
Refers to mortgage by a corporation used as a collateral security for a loan of a fixed amount.
Close-end mortgage
It provides financial assistance (loans) to all who are members which are employed in productive activities to earn income as part of its investment operations (private)
SSS
Those letter that cannot be cancelled or revoked at any time after its issuance or better the expiration.
Irrevocable Letter of Credit
refers to power the ability to obtain goods without an actual tender of payment. He has the obligation to be done to creditor (Obligor)
Debtor
Also defined as a “receipt given” by an importer who has loaned money upon importer’s goods.
Trust Receipts
It refers to credit that is granted for a short period
to help out the borrower with his temporary working capital needs.
Commercial Loans
5 Functions of Credit:
1. To ____ the savings of the lending customers.
2. To ______ these funds financially on the basis of the careful _______ and ______ of credit.
3. To ______ risk to a degree unattainable for individual investors
4. To ______ short term into long term funds through an expedient and carefeul staggering of ______ dates.
5. To perform _____ and _____ function.
- pool
- invest, investigation, analysis
- diversify
- transform, maturity
- insurance, trust
Just another term for government borrowing, as
means of pledging the goods faith and the resources on their behalf
Public Credit
8 Advantages of Credit:
1. facilitates and _______ to the increase in ______ by making funds available for productive purposes
2. saves _____ and expense by providing a safer and more _______ means of completing transactions.
3. helps expand the ______ ______ of every member of the business
4. enables ______ _____ of goods providing an increase in material well-being
5. helps expand _______ opportunities through education, job training and jobb creation.
6. spreads ______ to various sectors of the economy.
7. makes possible to the _____ of new _____.
8. helps _____ become more convenient for customers.
- contributes
- time, convenient
- purchasing power
- immediate consumption
- economic
- progress
- birth, industries
- buying
This is type of mortgage, a corporation may issue bonds in whatever number it may deem proper under the circumstance.
Open-end mortgage
It is essential growth for the
government to provide the necessary bases for growth.
Government Financing Institution
3 Kinds of Private Development Banks
Veteran Bank
Land Bank
Sales Finance Companies
a private corporate venture in the
financing of distribution through the purchase of the vendor’s instalment sales contract.
Sales Finance Companies
As provided under section 74 of RA no. 3844, it is intended to finance the acquisition by the government of landed estates for division and resale to small landholders as well as the purchase of the landholdings by the agricultural lessee from the landowner.
Land Bank
It is a written account of goods shipped by any person, signed by the agent of the owner of the vessel, or by its master, acknowledging receipts of the goods and promising to deliver them safe at the port directed, damages of the sea excepted.
Bill of Lading
3 Types of Loan Agreement
Revolving Credit
Term Loan
Stand-by-Commitment
It belongs to non-bank sector of the system and gather funds for its lending operation from sources other than deposit.
Investment Banking
A warehouseman, in the absence of some lawful excuse provided by the warehouse receipts law, is bound to deliver the goods upon a demand made either by the holder of a receipts for the goods or by the depositer, if such demand is accompanied with.
Obligation to Deliver
a bulk loan availed by manufacturers and public utility
firms granted to finance the acquisition of new or additional plants and
machinery
Industrial Loan
(2) objects of Mortgage
Chattel Mortgage
Mortgage on Real Property
It is an investment banks which are concerned with the transfer of capital from those have more funds than they actually use
to those who need for utilization in long term activities.
Investment Houses
4 Disadvantages of Credit:
1. Credit at times, encourages ______. This happens when those in charge of the ______ of other people throw caution to the wind and thereby become careless _____ in their eagerness and desire and make huge _____.
2. tends to contribute to ______ and carelessness on the part of people who obtain it.
3. many entrepreneurs resort to _____-______. Failure to generate expected income can cause a _____ which affects the nation’s economy,
4. Owing to the observation that business can be ______ or _______ rapidly though the use of credit.
- speculation, savings, unscrupulous, profits
- extravagance
- over-expansion, collapse
- expanded, contracted
Kinds of Bill of Exchange: (2)
Foreign Bill
Domestic Bill
Where a warehouseman delivers the goods to one who is not in fact lawfully entitled to the possession of them.
Liability for Misdelivery
2 Kinds of individual money lender
– Those who grant loans as personal accommodation to friends and relatives as a term of gratitude.
– Those who make the lending of money a profitable business.
It is a “bailment of goods” by a debtor to his creditor to be kept till the debt is discharge.
Pledge
advances use for agricultural
development that provides a favorable environment for a built market for the many products of country’s industries.
Agricultural Credit
these are loans to farmers, the purpose of the said
loan is to finance the planting, improvement and harvesting of
agricultural products.
Agricultural Loans
All movable which are within the commerce of man may be pledged, provided they are susceptible of possession.
Object of Pledge
(2) Other types of Mortgage
Close-end Mortgage
Open-end Mortgage
4 Types of Commercial Establishment
- Retail Stores
- Grocery and Department Stores
- Supermarkets
- Pawnshop
2 Types of International Organization
World Bank
International Monetary Fund
Those letter of credit that could be revoked under such condition.
Revocable Letter of Credit
It is legally defined as one wherein the drawer and the drawee reside in two different countries.
Foreign Bill
Bank advances to consumer are made either by means of loan or overdraft on current account.
Bank Credit
Those are property like land, building, machinery and factories which are immovable.
Mortgage on Real Property
Also known as “Book Credit”
Open Book Account
As defined under RA no. 5980 these are the financing corporation or partnership which primarily organized for the purpose of extending credit facilities to consumer, industrial, commercial or agricultural enterprise
Financing Companies
it is authorized to grant
loans for the establishment, rehabilitation, expansion or development of any agricultural, commercial or industrial or personal services including
public utilities as well as loan on or discount notes
Veteran Bank
As conceived and establish under RA no. 720 as amended, it is
designed to provide the credit needs of borrowers in the rural areaswithin easy reach and access and at reasonable terms
Rural Bank
While lenders and borrowers may be brought
together through credit instruments and credit market, in many instances
credit transaction are consummated through credit institution which serve as
middleman between lender and borrowers.
Financial Intermediaries
The pawner who fails to pay his obligation on the date it falls due may, within ninety days from the date of maturity of the obligation, redeem the pawn by paying principal as well as the interest corresponding to the obligation.
Redemption and Disposition
A medium of exchange, it is used not only for production, rather, it was intended for consumption.
Money
It consists of stipulation of the maximum amount which the business entity can borrow, the interest rate that will be imposed on all loans as the requirement which the borrowing entity must meet
Loan Agreement
Institutional and personal
administration of funds created or constituted for the benefits of others.
Trust and Pension Plan Manager
Those are personal property that are movable.
Chattel Mortgage
5 Classes and Kidns of Credit Instrument
Open Book Account
Trade Acceptance
Promissory Notes
Bill of Exchange
Credit Card
one kind of the consumer credit, which is the oldest form of sales and purchase credit.
Charge Account
4 Foundation of Credit
1. Creditors must have ______ _____ in the personal character and in the ability as well as willingness of their debtors to accept, honor, and settle their _______.
2. Proper ______ must exist for performing credit operations.
3. The money standard may be ______.
4. The ______ must stand ready to assist the creditor in enforcing payment of loan extended to the debtor.
- Absolute Confidence, obligations
- facilities
- stable
- government
Also considered as Consumer Credit
Personal Credit
Refers to a document which evidence the existence of credit transaction serve to establish the rights and responsibilities of the parties to the transaction
Credit Instrument
It is generally for consumption purposes, thus meet serious personal obligations.
Personal Loans
A significant to the continued functioning of a credit economy as may be gauged by the kind and amount of credit that they grant.
Commercial Establishment
– extending credit always involves a ______ for the lender since he can
never be certain that the debt will be paid.
Risk
Described as an acknowledgement of a debt by the buyer, in favor of the seller for merchandise.
Trade Acceptance
It is a numerous just as they varied in kinds and in scope
ranging from pawnshop to such credit institution as investment houses.
Financial Institution
These are advance made by a bank in behalf of an importer if on due date.
Trust Receipts
It is an unconditional order in writing addressed by one person to whom it is addressed to pay the demand at a fixed future time a certain amount of money to a specific person.
Bill of Exchange
In response to the needs of business
and industry, a number of corporations have been organized in this country aimed at purposely to provide a wide complement of
corporate financing services
Philippine Finance Companies
It is equally known as commercial credit, sometimes it is a trade credit.
Mercantile Credit
2 Types of Government Financing Institution
Social Security System (SSS)
Government Service Insurance System (GSIS)
It is a document that is frequently used to protect the bank when it becomes necessary to release the goods in order that the borrower may utilize or dispose of them.
Trust Receipts
Refers to any corporation organized for the purpose of accumulating the savings of depositors and investing
them together with its capital in bonds or loan secured by bonds and some security loan activities.
Savings and Mortgage Banking
3 Different Kinds of Cost
Interest
Operating Expenses
Risk
the corporation is conferred the right of securing a term loan under certain specified terms for current or for some future purposes within the time agreed upon
Stand-By-Commitment
it provides to fill the needs or employees against unforeseen
contingencies in the future, members shall be compulsory upon all appointive officers and employees in the executive, legislative and judicial branches of the government.
GSIS
supply of money in many instances could not adequately meet the increasing volume of goods entering the exchange transaction accounted for money being supplemented by the use of credit.
Birth of Credit
Lending Money with interest upon
Individual Money Lenders
A person with a good credit standing may be able to borrow on his signature alone.
Personal Loan
2 Nature of Credit (two-way street)
Debtor
Creditor
How Credit Affects Prices?
increases and decreases in credit may affect prices in
every much the same way as money supplies changes.
a business enterprise may finance its needs by borrowing from the bank on a short-term basis up to a certain specified maximum account.
Revolving Credit
3 Important Purposes are served by a bill of lading
- It conveys title to the merchandise.
- It is a receipt acknowledgement of the goods signed by the carrier.
- It serves as a contract of transportation between the shipper and the carrier.
It is the most commonly known legal instrument for secured borrowing in business either individual or corporate form.
Mortgage
As a seller of goods or services on credit, he has both moral and legal right to demand of his debtor to pay obligation when due (obligee).
Creditor
2 types of Letter of Credit
Irrevocable Letter of Credit
Revocable Letter of Credit
not only limited to underwriting and protection, it also deals with investment of the funds held by them in trust for them for
their policy holder
Insurance Companies
It is hardly to point out the observation that
business enterprise that extend credit shoulder the same expenses as
other business.
Operating Expenses
conversion of the
rehabilitation finance corporation to aid in the establishment of
provincial and city private development banks.
Development Bank of the Philippines
It emphasizes the business world is so common that by way of compliment, it is generally called as “the life blood of business”
Use of Credit
It is one wherein the parties both reside in the same country.
Domestic Bill
Used by individuals to buy consumer goods inteded to provide immediate satisfaction to their wants and needs.
Personal Credit
(3) Essential requisites to Pledge and Mortgage
- That they constituded to secure the fulfillment of a principal obligation.
- That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged.
- That the person constituting the pledge or mortgage have the free disposal of their property.
Business establishment engaged in lending money on property delivered as collateral
Pawnshop
It is also considered as another form of credit instrument whereby through its use, holders thereof are able to purchase goods and services on credit against payment in the future.
Credit Card
It is in the form of percentage serve as a charge for its’ (credit) use periodically.
Interest
One particular class of credit known as public credit that is, one government borrowing from another
International Organization
Cooperatives composed of small producers who voluntarily join together to form a business which themselves control and patronized.
Credit Unions
It is a “written acknowledgement” by a warehouseman that holds certain goods, identified by the receipt, for the person to whom the writing is issued.
Warehouse Receipts
means an open country, or just another name for agricultural bank
Rural Banks
Most common type of consumer credit today, a number of individual terms as buying on time.
Installment Credit
It is any corporation engaged in the business of accumulating the savings of its member or stockholders
Savings and Loan Association
These are loans to exporters to finance the
processing of exports of goods prior to their being shipped to the foreign buyer.
Packing Credit Advances
Granted by commercial banks to finance the acquisition of facilities such as machinery and equipment by manufacturer.
Term Loan
A type of devide serves to identify credit customer as those to whom the store has given a symbol of its confidence in them.
Credit Cards
