Random CICM Questions

Question 1

What is the working back method?

Answer 1

Days Sales Outstanding (DSO) is the average number of days that customers take to pay their bill. … The count back calculation method starts by taking the total outstanding balance for a customer, then deducting the latest month’s sales balance from the outstanding amount.

Question 2

What characteristics are associated with a Conservative Policy?

Answer 2

Policy tends to favour situations where:

• Only accepts business for customers judged to be creditworthy.
• Demands exceeds supply and customers can be selected.
• Cash flow is weak and tight collection policy is essential
• Profit margins are very low and under threat from bad debts/slow payment
• The product is tailor made for specific customers with little serious competition
• Interest rates are very high and extended credit cannot be afforded.

Question 3

What characteristics are associated with a Liberal Policy?

Answer 3

policy tends to favour situations where:

• Business is accepted from any customer unless it appears likely that they will be unable to pay.
• Stocks are high, and the product life or market is limited
• The product is or is becoming obsolete
• A new product is being launched or a new market attacked
• Profit margins are very high and therefore more risk can be taken.
• Market position is under threat from competition.

Question 4

What is a flat structure?

Answer 4

refers to an organization structure with few or no levels of management between management and staff level employees. The flat organization supervises employees less while promoting their increased involvement in the decision-making process

Question 5

What is a hierarchical structure?

Answer 5

allows the layout of a pyramid. Every employee in the organization, except one, usually the CEO, is subordinate to someone else within the organization.

Question 6

What is a Common Financial Statement (CFS)?

Answer 6

provides information on the customers financial circumstances and provides guidance regarding lifestyle expenditure

Question 7

What will a CFS do?

Answer 7

• Clearly show the financial position of their client
• Make an offer, where possible for consideration by creditors
• Create consistency and clear comparisons between customers
• Provides guidance on lifestyle expenditure using ‘trigger figures’
• Provides a written explanation for any customer excesses above the trigger figures
• Makes any offers more realistic and encourage pro-rata payments
• Have British Bankers Association approval

Question 8

Describe a situation where a creditor might petition a personal debtor for bankruptcy

Answer 8

Where the creditor is owed £5000 (since October 2016) either individually or shared with other creditors and can show evidence of unpaid debt by way of an unsatisfied demand or court judgement with sheriff statement of ‘insufficient assets’, the creditor may pursue petitioning. The creditor must then check for other petitions. If another petition has been filed then it would be cheaper to support an existing petition. If a bankruptcy order exists the creditor cannot continue and must register as a creditor. If no petition or order exists, the creditor may continue by handing in the petition in person and delivering a copy to the debtor.

Question 9

What don’t you get from using a charging order?

Answer 9

Gives power of sale to the judgment creditor