CCP Credit Policy & Procedures 2

Question 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?

Accepted Answer

Complete the quarterly review as required by policy

Answer

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

Question 2

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

Accepted Answer

The customer's financial capacity to repay

Answer

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

Question 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?

Accepted Answer

Delay shipment until dual approval is obtained

Answer

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

Question 4

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

Accepted Answer

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

Answer

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

Question 5

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

Accepted Answer

All employees who extend or approve credit

Answer

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

(CCP) Certified Credit Professional Practice Test

(CCP) Certified Credit Professional Practice Test

CCP Credit Policy & Procedures 2