CCM Strategic Planning & Analysis 2

Question 1

Which financial ratio is most directly used to evaluate a customer's ability to meet short-term obligations in credit analysis?

Accepted Answer

Current ratio

Answer

The current ratio (current assets divided by current liabilities) directly measures a company's short-term liquidity and ability to meet near-term obligations.

Question 2

A credit manager conducting a PEST analysis would categorize interest rate fluctuations under which factor?

Accepted Answer

Economic

Answer

Interest rate fluctuations are an economic factor in PEST analysis because they directly affect borrowing costs and macroeconomic conditions.

Question 3

In strategic credit management, what does a 'days sales outstanding' (DSO) trend increasing over multiple quarters most likely indicate?

Accepted Answer

Deteriorating accounts receivable quality or collections performance

Answer

A rising DSO trend signals that customers are taking longer to pay, indicating weakening collection performance or deteriorating receivable quality.

Question 4

When a credit department implements a portfolio segmentation strategy, the primary goal is to:

Accepted Answer

Allocate resources based on risk and profitability profiles

Answer

Portfolio segmentation allows credit managers to direct monitoring resources, credit limits, and terms to customer groups based on their relative risk and revenue contribution.

Question 5

Which scenario best represents a reactive rather than proactive credit strategy?

Accepted Answer

Tightening credit terms only after a significant bad debt loss occurs

Answer

Reacting to credit losses after they occur is reactive; proactive strategy involves monitoring early warning signs and adjusting exposure before losses materialize.

(CCM) Certified Credit Manager Practice Test

(CCM) Certified Credit Manager Practice Test

CCM Strategic Planning & Analysis 2