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WorksheetsIssuing Credit
Total questions: 35
Worksheet time: 18mins
What is the primary purpose of issuing credit?
To increase sales
To decrease expenses
To improve employee satisfaction
To reduce inventory costs.
In the context of issuing credit, a higher credit score generally indicates a ______.
lower risk
higher risk
no change in risk
increased interest rate
Why do businesses need credit?
To increase liabilities
To manage cash flow
To reduce expenses
To avoid taxes.
Fill in the blank: To evaluate creditworthiness, businesses need to identify key financial documents such as ______.
Marketing plans
Financial statements
Employee records
Inventory lists
Which of the following is a key component of financial literacy?
Introduction to Credit
Financial Statements
Ratio Analysis
All of the above.
What is credit?
The ability to acquire money, goods, or services before payment
A type of savings account
A form of investment
A government bond.
Credit is most commonly issued by ________.
Retail stores
Financial institutions
Government agencies
Non-profit organizations.
Why do businesses need credit?
To purchase assets such as inventory or equipment
To increase employee salaries
To expand office space
To hire more staff.
Which of the following is a reason for businesses to need credit?
To replace equity or to repay owners or investors
To conduct market research
To improve customer service
To develop new products.
Which of the following is a question that should be asked to potential borrowers?
What is your favorite color?
Who is the principal decision-maker?
Do you like coffee?
What is your pet's name?
Fill in the blank: A question to ask potential borrowers is whether the business has been in operation for at least ____.
one year
two years
three years
five years
Which of the following is a question to ask potential borrowers?
Does the business have a strong credit history?
Is the business located in a prime area?
Does the business have a large workforce?
Is the business involved in international trade?
What is the purpose of a credit analysis?
To review the borrower's creditworthiness
To determine the interest rate
To approve the loan
To calculate the loan amount.
Credit analysis is made up of five basic components known as the 'Five Cs'. Which of the following is NOT one of the Five Cs?
A) Character
B) Capacity
C) Capital
D) Creativity
A credit analysis is a complete and thoroughly documented loan request, including a business plan to help understand the business requesting credit. True or False?
True
False
Fill in the blank: The 'Five Cs' of credit analysis include capacity, capital, collateral, conditions, and _______.
A) Character
B) Creativity
C) Calculation
D) Currency
Capacity refers to exactly how the borrower intends to ______ the loan.
secure
repay
invest
insure
What does 'Capital' in a business context refer to?
Money invested by the borrower
Money borrowed from the bank
Money given by investors
Money earned from sales
Before asking anyone else to commit any funding, 'Capital' should be contributed from the borrower's own ____.
Assets
Loans
Profits
Sales
What is collateral?
A) A type of loan
B) A pledge of an asset owned by the borrower
C) A form of currency
D) A type of interest rate.
Collateral can also be called a ______.
Loan
Guarantee
Interest
Payment
When considering loan conditions, one should ______ the local economic climate.
Ignore
Consider
Overlook
Disregard
What does 'Character' refer to in the context of lending?
The borrower's physical appearance
The general impression made by the potential borrower
The borrower's income level
The borrower's education level.
'Character' is shown partly by the borrower's ______, which allows the lender to form a subjective opinion as to whether or not the borrower is sufficiently trustworthy to repay the loan.
credit history
physical appearance
income level
education level
What does an inquiry into a borrower's character typically involve?
Financial statements
Quality of references and background
Market analysis
Product development
An inquiry into a borrower's character can initiate a review of _________.
Financial forecasts
Educational background and experience
Marketing strategies
Product designs.
What is the primary purpose of financial statements?
To provide information about a company's financial performance
To issue credit to customers
To calculate taxes
To manage employee payroll.
Financial statements are used to assess a company's ______.
Marketing strategy
Financial health
Employee satisfaction
Product quality
Which of the following is NOT a financial statement used in addition to the 'Five Cs' to make a credit decision?
Personal financial statement
Balance sheet
Profit and loss statement
Marketing plan
Fill in the blank: A _______ is used in addition to the 'Five Cs' to make a credit decision.
Personal financial statement
Marketing strategy
Advertising budget
Customer feedback
What does a Personal Financial Statement indicate?
A borrower's net worth
A borrower's income
A borrower's expenses
A borrower's liabilities.
A Personal Financial Statement is required for each partner or stockholder owning a substantial percentage of the business. True or False?
True
False
A Personal Financial Statement is important particularly if the borrower has never received ______.
financing
a loan
a grant
a gift
What does a balance sheet provide?
A) A snapshot of the borrower's business at a specific time
B) A detailed history of the company's transactions
C) A list of the company's employees
D) A forecast of future profits.
A balance sheet keeps track of the company's assets, including cash and the company's ______.
profits
debts
employees
products
