Business Management & Law - Module 8 Test Review

A credit policy is:

• a set of guidelines that a company uses to determine how much credit to extend to a customer.

• a document that outlines the terms and conditions of a loan.

• a financial statement that shows a company's credit history.

• a legal agreement between a lender and a borrower.

Which of the following is an importance of a credit policy?

• Increases financial risk

• Ensures fairness in credit decisions

• Provides unstructured approval process

• Discriminates between customers

A credit limit is:

• the maximum amount of credit a financial institution extends to a client.

• the minimum amount of credit a financial institution extends to a client.

• the exact amount of credit a financial institution extends to a client.

• the average amount of credit a financial institution extends to a client.

Accounts receivable refers to money owed to a company by customers who have purchased goods or services on credit. True or False?

• True

• False

Liquidity refers to the ability of an asset to be quickly converted into cash without significant loss in value.

• The ability to convert an asset into cash quickly without loss

• The profitability of a company

• The amount of debt a company has

• The growth rate of an economy

Which of the following is considered a liquid asset?

• Real estate

• Accounts receivable

• Inventory

• Equipment

Name the three major credit bureaus in the U.S.

• Experian, TransUnion, Equifax

• Experian, TransUnion, Credit Karma

• Equifax, Credit Karma, FICO

• TransUnion, FICO, Experian

Consumer credit includes credit cards, mortgages, car loans, and personal loans. It allows shoppers to make immediate purchases and pay over time, usually with ________.

• interest

• no fees

• a discount

• a penalty

The two types of consumer credit mentioned are:

• Revolving credit and installment credit

• Secured credit and unsecured credit

• Personal credit and business credit

• Short-term credit and long-term credit

One advantage of consumer credit is:

• It allows consumers to purchase goods and services immediately and pay for them over time.

• It increases the overall cost of purchases due to interest charges.

• It limits the purchasing power of consumers.

• It requires consumers to pay the full amount upfront.