Module 2

Question 1

As to acceptability

Answer 1

1. Credit of general acceptability
2. Credit of limited acceptability

Question 2

Includes those forms of credit which all persons within a country are willing to take in payment for goods delivered or services rendered

Answer 2

Credit of general acceptability

Question 3

Issued under such condition as to make them as acceptable means of payment only within a restricted field. They include the promissory note, the bill of exchange, various forms of bank credit and the open book account

Answer 3

Credit of limited acceptability

Question 4

As to term of loan

Answer 4

1. Demand Loan
2. Time-Loan

Question 5

No definite maturity date, the borrower or debtor must be ready because the creditor can get the necessary payment any time

Answer 5

Demand Loan

Question 6

Loans which have definite maturity dates

Answer 6

Time-Loan

Question 7

Payable within or on 1 year

Answer 7

Short-term loan

Question 8

Often 1 year but not more than 5 years

Answer 8

Medium-term Loan

Question 9

Payable after 5 years or more

Answer 9

Long-term Loan

Question 10

As to form of loan

Answer 10

1. Direct Loan
2. Discount
3. Overdraft

Question 11

The lender may give to the borrower the EXACT AMOUNT as contained in the promissory note. Interest will be paid at the maturity date or every installment

Answer 11

Direct Loan

Question 12

The lender collects in advance the interest and gives to the borrower the balance

Answer 12

Discount

Question 13

The amount withdrawn is in excess of the depositor’s net balance in the bank. There is a pre-arranged amount that can be withdrawn for a definite period of time fixed in the agreement or contract but the bank and the customer or depositor .

Answer 13

Overdraft

Question 14

As to type of user of loan

Answer 14

1. Consumer or personal credit
2. Mercantile or commercial credit
3. Bank credit
4. Investment credit

Question 15

It is usually extended to the individual in which the purpose is to finance ome personal needs like the purchase of merchandise or commodities on a depressed payment plan

Answer 15

Consumer or personal credit

Question 16

It is usually extended to persons dealing in COMMERCE and TRADE and is used to finance the purchase of inventories

Answer 16

Mercantile or commercial credit

Question 17

The commercial banks extend short-term creidt to businessman for working capital purposes, that is, for the purchase of raw materials, the payment of wages and other expenses of a business incident to current operations.

Answer 17

Bank credit

Question 18

Businessman usually obtain long-term funds through intermediary financial institutions such as investment banks, savings bank, insurance company or temporarily from commercial banks, primarily for the purpose of obtaining fixed capital.

Answer 18

Investment credit

Question 19

As to security

Answer 19

1. Secured loans
2. Unsecured loans

Question 20

Loans guaranteed by the assignment of some tangible assets of value which may be sold by the lender in case the borrower fails to pay for settlement of the debt

Answer 20

Secured loans

Question 21

No collateral, character or clean loans are backed up safely by the integrity, ability and the willingness of the borrower to pay

Answer 21

Unsecured loans

Question 22

As to purpose of use

Answer 22

1. Agricultural credit
   2.commercial credit
2. Industrial credit
3. Consumer credit

Question 23

These are loans granted to fiance the cultivation, development and improvement of agricultural land

Answer 23

Agricultural creidt

Question 24

Is used to finance the day to day operation. A type of short-term loan granted to finance the production and distribution of commodities either by wholesale or retail, whether in storage or in transit to foreign and domestic markets

Answer 24

Commercial credit

Question 25

It is used to finance the manufacture of goods, the construction of plant buildings or the acquisition and installation of equipment of machineries

Answer 25

Industrial credit

Question 26

Loan granted for the purchase of goods and services for personal purposes, usually for intermediate consumption.

Answer 26

Consumer credit

Question 27

As to matter of payment

Answer 27

1. self-liquidating loan 2. Non self liquidating loan

Question 28

Loans pays for itself from the income of the amount borrowed

Answer 28

Self-liquidating loans

Question 29

Are payable when the payments comes from earninsg of the borrower

Answer 29

Non self liquidating

Question 30

An oral agreement to settle an obligation can be drawn into a written contract

Answer 30

Credit Instrument

Question 31

Is the transfer of an instrument as to posession and title, if payable to BEARER, it is by mere delivery. If payable to ORDER, it is effected by both endorsement and delivery

Answer 31

Negotiation

Question 32

Signing the name at the back of check to negotiate it

Answer 32

Endorsement

Question 33

Means proper presentation of the instrument either for payment or for acceptance. If the instrument presented for payment is paid or accepted by the drawee, it is known to be HONORED. DISHONORED payment rejected by the drawee.

Answer 33

Presentment

Question 34

Is an instrument is DISHONORED upon presentation a protest may be filed or waived depending upon the circumstances if filled, this is usually in writing. Procedures for this is covered by law

Answer 34

Protest

Question 35

When there is a specified payee named in the instrument or when it is so indicated by the words “or order”.

Answer 35

Payable to Order

Question 36

Classification of Credit Instrument

Answer 36

1.As to acceptability 2. As to form 3. As to functions 4. As to Negotiability

Question 37

The instrument may either be of unlimited or limited acceptability

Answer 37

As to acceptability

Question 38

Those instruments which pass from hand-to-hand without question as toits source

Answer 38

Unlimited acceptability

Question 39

As to form

Answer 39

1. Order to pay 2. Promise to pay

Question 40

Is generally defined as the order of one person to a second person to pay a 3rd person a sum, certain money on demand or at a future determinable time. It may be in the form of checks, drafts, acceptances or postal money orders. It has 3 parties namely: DRAWER who gives the order, DRAWEE who is ordered to pay, and PAYEE, who is to recive payment

Answer 40

order to pay

Question 41

Who gives the order

Answer 41

Drawer

Question 42

Who is ordered to pay

Answer 42

Drawee

Question 43

Who is to receive the payment

Answer 43

Payee

Question 44

Contains the promise of one person to pay another a sum of certain in money on demand or at a future demandable time. It may be open book accounts, promissory notes, collateral PN, letters of credit and bonds. There are only 2 PARTIES in a promise to pay, the MAKER or the person promising to pay and the one to receive payment is the PAYEE.

Answer 44

Promise to pay

Question 45

As to functions of credit instrument

Answer 45

1. Credit money 2. Commercial credit instruments 3. Investment credit instrument

Question 46

Emphasizes their use as a medium of exchange

Answer 46

Credit money

Question 47

Which comprise of the instruments use dto facilitate the use of credit in short-term commercial pursuits

Answer 47

Commercial credit instruments

Question 48

Are those used for long-term credit

Answer 48

Investment credit instruments

Question 49

Commercial credit instrument can be subdivided as

Answer 49

1.Promises to pay 2. Orders to pay

Question 50

It is one of the most common forms of credit instrument which in effect gives the implied verbal promise of the debtor when he buys consummable goods on credit

Answer 50

Open book account

Question 51

It is an unconditional written promise to the maker to pay a sum certain in money to bearer or order on demand or at a future determinable time

Answer 51

Promissory note

Question 52

This type of note is similar to the ordinary promissory note. However, it is called a ____________ because the collateral is describes on its face or a separate document bears such description

Answer 52

Collateral promissory note

Question 53

It is a written promise on the part of the bank to honor drafts drawn against it or for its account, by a specified beneficiary or his order under the specifications conatined in the letter or credit

Answer 53

Commercial Letters of Credit

Question 54

It is similar in intent as the commercial letter of credit. The banks credit standing is likewise substituted for that of the traveler. It’s use is to provide the traveler with funds enroute.

Answer 54

Traveller’s letter of credit

Question 55

Generally is an order of a depositor to his bank to pay a sum certain in money to a third person or himself on demand

Answer 55

Checks

Question 56

Classification of Checks

Answer 56

1. Personal check 2. Cashier’s/ Manager’s/Treasurer’s 3. Certified check 4. Traveller’s check

Question 57

Sometimes known as a business check. Its drawer is an individual for personal use or purpose

Answer 57

Personal check

Question 58

As in a check this is an oder to pay

Answer 58

Cashier’s/Manager’s/Treasurer’s

Question 59

Originally a personal check. The bank’s certification is required by the recipient of the check shall have been processed

Answer 59

Certified checl

Question 60

A variation of teh traveller’s letter of credit, this is also used by travelers

Answer 60

Traveller’s check

Question 61

Is one which is meant for deposit only or for a specified purpose only which is also used to limit its further negotiation. The face of the check will bear two parallel lines on the left upper corner

Answer 61

Crossed check

Question 62

Is one which is dated beyond the date of deposit or actual balance

Answer 62

Post-dated check

Question 63

Check deposited or presented for payment after six months from date of deposit or issuance

Answer 63

Stale check

Question 64

Checks returned tothe drawer. Also termed as BAD CHECKS, which means that they are not sufficiently covered with FUNDS.

Answer 64

Rubber or Bouncing Checks

Question 65

When the deposits is check is finally cleared and paid by his bank, these checks are marked

Answer 65

Cancelled checks

Question 66

Check presented for payment within six month

Answer 66

Dated check

Question 67

Check without amounts written

Answer 67

Blank check

Question 68

Are orders to pay and are likewise drawn by a drawer against a drawee to pay a 3rd person a sum certain in moneyon demand or at a future determinable time.

Answer 68

Drafts

Question 69

Is originallyorder to pay. It is a time draft. It is also a promise to pay. It would then certain the promise of the drawee (now known as acceptor) to pay the draft at maturity

Answer 69

Acceptance

Question 70

In the realm of investment credit, time instruments used are promises to pay which are in term of:

Answer 70

1. Bonds 2. Long-term Notes 3. Evidences of ownership in a corporation

Question 71

Are long term promissory notes issued under a corporate seal, in large sums actually, and in services

Answer 71

Bonds

Question 72

Bonds and this are both promises to pay and their terms of payment covers 5 years or more

Answer 72

Long-term promissory notes

Question 73

Evidences of ownership

Answer 73

1. Stock certificate 2. Stock of right

Question 74

This instrument evidences the part of ownership of a corporation’s capital through purchase of share or shares of stock. The corporation is not under obligation to devlare dividends if earned and if ever , the stockholders shares according to the type of stock he owns

Answer 74

Stock certificate.

Question 75

The RIGHT referred to here is the pre-emptive right attached to ownership of a share of stock. This means that the original stockholder is given the option to purchase new additional shares of stock at the new issue price before such stocks are offered to the public

Answer 75

Stock of right