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Credit Policy & Procedures Flashcards

7 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning โ€” missed cards come back until you master them.

Read the first 7 Credit Policy & Procedures flashcards as text
  1. A credit policy states that all accounts over $50,000 must be reviewed quarterly. A $75,000 account has been stable for three years with no late payments. What should the credit analyst do?

    Answer: Complete the quarterly review as required by policy

    Credit policies apply uniformly regardless of account history; stable accounts should still be reviewed to confirm conditions have not changed.

  2. Which element is MOST critical when establishing credit limits within a credit policy?

    Answer: The customer's financial capacity to repay

    Credit limits must be grounded in the customer's demonstrated financial capacity, including cash flow and net worth, to ensure collectibility.

  3. A credit policy requires two approvals for any credit extension above $100,000. An urgent order for $120,000 arrives and only one approver is available. What is the correct course of action?

    Answer: Delay shipment until dual approval is obtained

    Dual-approval controls exist to prevent single-point fraud and error; circumventing them undermines internal controls.

  4. What is the primary purpose of including a credit hold procedure within a credit policy?

    Answer: To stop new shipments when a customer's account is delinquent

    Credit holds protect the company from extending additional exposure to customers already delinquent on existing obligations.

  5. When a credit policy is revised, which stakeholder group is MOST important to notify promptly?

    Answer: All employees who extend or approve credit

    Internal staff executing credit decisions must be trained on revised policy to ensure consistent and compliant application.

  6. A company's credit policy does not address cryptocurrency payments. A large customer requests to pay invoices in Bitcoin. What is the best initial action?

    Answer: Escalate to management for a policy determination before accepting

    Gaps in credit policy should be escalated to management for a formal ruling rather than improvised at the analyst level.

  7. Under a standard credit policy, what distinguishes a credit limit from a credit line?

    Answer: A credit limit is the maximum outstanding balance allowed; a credit line is a revolving facility drawn at will

    A credit limit caps total outstanding exposure for a customer, while a credit line is a revolving authorization the customer can draw on repeatedly up to that cap.

Credit Policy & Procedures Flashcards โ€” CCP Study Cards with Answers