WorksheetsTrade Credit and Factors to Consider Before Granting Credit
Total questions: 48
Worksheet time: 24mins
What is trade credit?
A type of loan given by banks
A business-to-business (B2B) agreement in which a customer can purchase goods without paying cash up front, and paying the supplier at a later scheduled date
A government grant for businesses
A type of insurance for goods
Credit occurs when a seller allows a buyer to take possession and enjoy a commodity with a promise to pay in the future.
True
False
Before any credit facility is granted, the ______ of the buyer has to be critically evaluated.
income
address
age
education
If the income of the buyer is too small in relation to the commodity he wants to purchase, then the transaction will not take place.
True
False
What is the role of a guarantor in a credit transaction?
To collect payment on behalf of the lender
To stand for someone who collects credit in case of default
To provide employment to the buyer
To determine the time of payment
Fill in the blank: If the person who is to collect the credit is not trustworthy, then the ______ will not be granted.
credit facility
loan amount
interest rate
bank account
The present place of work and address of the buyer must be documented before a credit transaction can take place because:
it helps verify the buyer's identity and ability to repay the credit.
it is required for marketing purposes only.
it is needed to send promotional offers to the buyer.
it is necessary to calculate the interest rate.
Which of the following is a merit of credit sales?
It leads to increase in sales
It leads to increase in the price of goods
It can lead to bad debts
It requires a lot of record keeping
Fill in the blank: One of the merits of credit sales is that it leads to increase in profit as higher prices are charged for ______ transactions.
credit
cash
barter
online
Which of the following is a merit of credit sales?
It makes it possible to use goods that have not been paid for
It can lead to bad debts
It requires a lot of record keeping
It leads to increase in the price of goods
Fill in the blank: Credit sales increase the standard of living of the buyers because buyers can buy goods they never thought they could afford, such as ______ and landed property.
motor cars
groceries
stationery
clothes
Which of the following is a merit of credit sales?
It reduces the problem of holding stock for too long
It can lead to bad debts
It requires a lot of record keeping
It leads to increase in the price of goods
Fill in the blank: Credit sales encourage ______ purchase.
bulk
retail
impulse
seasonal
Which of the following is a merit of credit sales?
It serves as a means of meeting temporary needs for cash
It can lead to bad debts
It requires a lot of record keeping
It leads to increase in the price of goods
Which of the following is a demerit of credit sales?
It leads to increase in the price of goods
It leads to increase in sales
It encourages bulk purchase
It increases the standard of living of the buyers
Fill in the blank: One demerit of credit sales is that it can lead to ______ when some of the debts cannot be recovered.
bad debts
increased profits
higher sales volume
improved cash flow
Which of the following is a demerit of credit sales?
It requires a lot of record keeping
It leads to increase in sales
It encourages bulk purchase
It increases the standard of living of the buyers
Which of the following is a type/source of credit?
Mortgage
Loan
Overdraft
Trade credit
Book-me-down
Fill in the blank: ________ is a source of credit where the customers are given a certain amount of money as loan to buy a building or land of their own. Such assets are used as collateral and the mortgage is expected to pay back the loan along with the agreed interest. The lender is called the mortgagee.
Mortgage
Credit Card
Personal Loan
Overdraft
Fill in the blank: ________ is a sum of money borrowed by an individual, firms and government from financial institutions.
Loan
Deposit
Gift
Tax
Which type of credit involves using a building or land as collateral?
Mortgage
Loan
Overdraft
Credit card
Which of the following is NOT listed as a type/source of credit?
Mortgage
Loan
Savings account
Hire purchase
Fill in the blank: ________ is a credit facility given by the bank that allows a current account holder to withdraw more than the balance remaining in his account, the excess is known as overdraft, overdraft is credit. Interest will be paid on the overdraft.
Bank OVERDRAFT
Bank DEPOSIT
Bank LOAN
Bank MORTGAGE
Fill in the blank: ________ is a type of credit that allows the trader to collect goods from a supplier without paying for them immediately. It is aimed at increasing the quantity of goods sold by the seller.
TRADE CREDIT
CASH CREDIT
MORTGAGE LOAN
TERM LOAN
Fill in the blank: ________ is a type of credit that allows a regular customer to buy food at restaurants, or other domestic items from shops and groceries, and pay later when expected money or salary comes in.
BOOK ME DOWN
CASH ON DELIVERY
PREPAID CARD
INSTANT LOAN
Fill in the blank: ________ enable the holders to make purchases of a stated amount in shops that accept them, while the amount involved is claimed by the seller from the financial house that issued them.
CREDIT CARDS
DEBIT CARDS
CHEQUE BOOKS
SAVINGS ACCOUNTS
What is a hire purchase? This is a form of credit whereby the seller allows the buyer to take possession of the goods after the first installment of the agreed price. Under this arrangement, the seller retains _______ of the goods until the last installment is made; otherwise, the buyer loses possession to the seller and no refund is made of earlier amount paid. It is a form of credit arrangement for those who cannot afford to buy capital goods. Fill in the blank: The seller retains _______ of the goods until the last installment is made.
ownership
receipt
guarantee
warranty
Which of the following is a characteristic of the hire purchase agreement?
The agreement must be in written form
The agreement can be oral only
The agreement does not need to be documented
The agreement must be signed by a witness
Which of the following must be stated in a hire purchase agreement?
The hire purchase and the cash price
The date of delivery only
The seller's address only
The buyer's occupation only
Which of the following is true about hire purchase?
The buyer takes ownership of the goods after an initial deposit.
The hirer or the buyer takes possession of the goods after an initial deposit.
The seller takes possession of the goods after an initial deposit.
The buyer cannot take possession of the goods until full payment is made.
Hire purchase is suitable for ________.
capital goods
perishable goods
consumable goods
services
In hire purchase, the buyers can take possession of goods but not ________.
ownership
payment
guarantee
insurance
Hire purchase attracts higher prices.
True
False
The right to repossess the goods if the buyer fails to pay in a hire purchase agreement belongs to:
The seller
The buyer
The government
The bank
One advantage of hire purchase to the buyer is:
The buyer can acquire goods without paying the full price upfront.
The buyer receives a discount for cash payment.
The buyer owns the goods immediately after the first payment.
The buyer does not have to make any payments.
Hire purchase improves the general standard of living of people by:
enabling people to acquire goods and services they cannot afford to pay for at once
increasing the cost of goods and services for everyone
limiting access to essential goods and services
discouraging people from making purchases
Which of the following is a disadvantage of hire purchase to the buyer?
The buyer may be tempted to overbuy.
The seller retains ownership of goods until full payment is made.
Buyers can return the goods if the need arises.
The seller repossesses the goods in order to avoid bad debt.
Which of the following is an advantage of hire purchase to the seller?
The buyer pays a high rate of interest.
The seller retains ownership of goods until full payment is made.
The buyer may not be able to negotiate for a better contract.
Buyers have access to credit that they could not obtain from the banks.
Fill in the blank: Under hire purchase, the buyer pays a _______ rate of interest.
high
low
fixed
zero
Fill in the blank: The seller repossesses the goods in order to avoid _______.
bad debt
extra profit
legal ownership
market competition
Which of the following is a disadvantage of hire purchase to the buyer?
The buyer may not be able to insist on better quality goods.
The seller repossesses the goods in order to avoid bad debt.
Buyers can return the goods if the need arises.
The seller retains ownership of goods until full payment is made.
Fill in the blank: One disadvantage of hire purchase to the seller is that the buyer may ________ with the goods.
run away
pay early
return
complain
Fill in the blank: One disadvantage of hire purchase to the seller is that it can lead to ________ action.
court
friendly
voluntary
reward
Fill in the blank: One disadvantage of hire purchase to the seller is that goods repossessed may be difficult to ________.
sell
store
repair
transport
Fill in the blank: One disadvantage of hire purchase to the seller is that a lot of ________ can be tied down.
capital
interest
goods
profit
Fill in the blank: One disadvantage of hire purchase to the seller is that it may result in bad ________.
debts
profits
contracts
sales
Fill in the blank: One disadvantage of hire purchase to the seller is that court cases bring additional ________ to the seller.
cost
profit
customers
goods
Fill in the blank: Deferred payment refers to a buying arrangement where the buyer makes a purchase but delays the ________ for a specified period.
payment
delivery
contract
shipment
