CCM CCM Credit Policy & Procedures 2

Question 1

Which of the following BEST describes a credit application's purpose?

Accepted Answer

A tool to collect financial and trade reference information for underwriting

Answer

A legal contract binding the buyer to purchase

Answer

A marketing document to attract new customers

Answer

A billing statement

Question 2

A personal guarantee on a business credit account means:

Accepted Answer

An individual owner assumes personal liability for the business debt

Answer

The business insures the credit manager against loss

Answer

The bank guarantees payment

Answer

Sales are guaranteed by the guarantee

Question 3

What is the role of trade references in a credit application?

Accepted Answer

To provide insight into how the applicant pays other creditors

Answer

To verify the applicant's marketing strategy

Answer

To confirm the applicant's sales volume

Answer

To list the applicant's product catalog

Question 4

Credit terms of '2/10 net 30' mean:

Accepted Answer

A 2% discount if paid within 10 days; full amount due in 30 days

Answer

Pay within 2 days or the account is suspended for 30 days

Answer

2% interest charged after 10 days up to 30 days

Answer

Net payment of 2% due in 10 to 30 days

Question 5

Which procedure helps prevent duplicate payments and fraud in the credit-to-cash process?

Accepted Answer

Segregation of duties between billing, cash application, and collections

Answer

Increasing credit limits for all customers

Answer

Combining all AR functions into one role

Answer

Eliminating paper invoices

Question 6

What should a credit policy specify regarding new customer onboarding?

Accepted Answer

Documentation required, credit limit starting point, and review timeline

Answer

Only the marketing welcome package

Answer

Sales commission structure

Answer

Product pricing tiers