Module 1

Question 1

The word credit comes from the latin word

Answer 1

CREDERE or CREDITUM

Question 2

Credere or Creditum means

Answer 2

to trust

Question 3

is defined as a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date-generally with interest

Answer 3

Credit

Question 4

may either decreases assets or increases liabilities and equity

Answer 4

Credit

Question 5

is considers to be the “Life-Blood of business”

Answer 5

Credit

Question 6

Basic elements of credit

Answer 6

1. It is the ability to obtain a thing of value
2. A promise to pay
3. Definites sum of money
4. payable on demand or future time

Question 7

a thing of value may mean cash form of credit, merchandise or even services

Answer 7

it is the ability to obtain a thing of value

Question 8

The borrower makes a promise to pay the lender. This is valid if it is through writing and acknowledge by both parties wherein the amount of the loan, interest and maturity is specified

Answer 8

a promise to pay

Question 9

credit involves the exact amount of money loaned or extended by the creditor to the debtor

Answer 9

definite sum of money

Question 10

credit has specific date when to settle the obligation, if none, it is considered to be payable on demand or anytime the creditor demands for payment

Answer 10

payable on demand or future time

Question 11

characteristics of credit

Answer 11

1. it is a bi-partite or two-party contract
2. it is elastic
3. the presence of trust and faith
4. it involves futurity

Question 12

two parties are involved in the credit agreement, the debtor and the creditor. The debtor is the party requesting for the loan while the party extending the loan is the creditor

Answer 12

It is a bi-partite or two party-contract

Question 13

the amount of credit may be increased or decreased in value by the creditor, this usually depends on the value of the collateral pledge by the creditor

Answer 13

it is elastic

Question 14

the creditor rely more on the debtor’s ability and willingness to pay his debt. This is also the risk factor in credit particularly when the debtor was not able to fulfill his obligation.

Answer 14

The presence of trust and faith

Question 15

credit has its maturity for the settlement of obligation

Answer 15

it involves futurity

Question 16

for the credit system to continue in its existence and attain a healthy growth and development, it is necessary that it should be anchored a strong pillars/foundations for support

Answer 16

foundations of credit

Question 17

foundations of credit

Answer 17

1. confidence
2. proper facilities
3. stability of monetary standards
4. government assistance
5. credit risk

Question 18

creditors must have absolute confidence in theoersonal character and in the ability as well as willingness of their debtors to accept honor and settle their obligations

Answer 18

confidence

Question 19

this exist in performing credit operations, sources of credit information must be available to those granting credit. If a correct and proper evaluation of credit rating is to be made which is the first crietrion in the grant of credit. Credit information includes data about the debtor as a gauge of his paying capacity which can be gathered out of a conduct of credit investigation. moreover, credit document should be present which serves as a written agreement signed by both parties

Answer 19

proper facilities

Question 20

money must be stable wherein the purchasing power of money is considered when extending a credit. The more stable the value of money is, the greater the possibility for approving credit

Answer 20

stability of monetary standards

Question 21

government must stand ready to assist the creditir in enforcing payment of loans extended to debtors. Debtors are given more protection since they cannot be imprisoned for non-performance of obligation that is they do not have any assets or property. In this case, the creditors take the risk.

Answer 21

government assistance

Question 22

it is the possibility that the debtor may not fulfill his obligations. shall be borne by the creditors

Answer 22

credit risk

Question 23

are the framework used by many traditional lenders to evaluate potential borrowers

Answer 23

C’s of credit

Question 24

C’s of credit

Answer 24

1. character
2. capacity/cash flow
3. capital
4. conditions
5. collateral

Question 25

a lender’s opinion of a borrower’s general trustworthiness, credibility and personality

Answer 25

character

Question 26

your ability to repay the loan

Answer 26

capacity/cash flow

Question 27

the amount of money invested by the business owner or management team.

Answer 27

capital

Question 28

the condition of your business- whether it is growing or faltering- as well as what you’ll use the funds for. It also considers the state of the economy. Industry trends and how these factors might affect your ability yo repay the loan

Answer 28

conditions

Question 29

assets that are used to guarantee or secure a loan

Answer 29

collateral

Question 30

advantages of credit

Answer 30

1. the use of goods and services as you pay them
2. the opportunity to buy costly items that you might not be able to buy with cash.
3. a source of cash for emergency or unexpected expenses.
4. convenience

Question 31

disadvantages of credit

Answer 31

1. the reduction of future income
2. expense
3. temptation
4. the risk of serious consequences if you misuse credit