CCP Credit Policy & Procedures

Question 1

What is the purpose of a credit policy in an organization?

Accepted Answer

To provide guidelines for extending credit responsibly.

Answer

To avoid giving any credit.

Answer

To offer credit without any conditions.

Answer

To focus solely on customer acquisition.

Question 2

What should a credit policy include?

Accepted Answer

Criteria for creditworthiness, terms, and overdue account management.

Answer

A list of all customers.

Answer

Only the names of approved customers.

Answer

Terms for collecting payments only.

Question 3

Why is credit risk assessment important in credit policy?

Accepted Answer

It helps assess the likelihood of default and mitigate losses.

Answer

It helps in maximizing profits.

Answer

It focuses on increasing the credit limit.

Answer

It is irrelevant to credit decisions.

Question 4

How often should a credit policy be reviewed?

Accepted Answer

Regularly, to adapt to market conditions and organizational goals.

Answer

Every year.

Answer

Only when there's a financial crisis.

Answer

Only when there are changes in senior management.

Question 5

What role does management play in credit policy?

Accepted Answer

Management sets the policy and ensures its alignment with company goals.

Answer

Management has no role in credit policy.

Answer

Management only enforces the policy.

Answer

Management reviews policies without making changes.

Question 6

What is the significance of credit terms in credit policy?

Accepted Answer

They outline the payment schedule and risk level of the credit extension.

Answer

They have no significance.

Answer

They focus on how to acquire more customers.

Answer

They set policies on marketing credit products.

Question 7

How should overdue accounts be managed according to a credit policy?

Accepted Answer

With reminders, late fees, and collections procedures.

Answer

Ignore overdue accounts.

Answer

Only by reducing the credit limit.

Answer

By giving customers more credit.

Question 8

What is the importance of credit policy compliance?

Accepted Answer

It ensures all credit decisions are fair and within regulatory standards.

Answer

It only applies to large organizations.

Answer

It increases the amount of credit granted.

Answer

It eliminates the need for risk assessment.

Question 9

What should happen if a credit policy is not followed?

Accepted Answer

The policy should be adjusted and enforced more strictly.

Answer

Nothing should happen.

Answer

The policy should be ignored.

Answer

The policy should be relaxed.