Credit Management

What is the main responsibility of the credit department in a business?

• Granting credit

• Gathering and analyzing credit information

• Collecting overdue payments

• Setting sales targets

Which of the following is NOT a principle of sound credit management?

• Estimation of credit risk

• Enforcement of credit collection

• Avoiding credit checks for returning customers

• Periodic evaluation of credit policies

What is one of the potential consequences of being overly strict in granting credit?

• Increase in customer loyalty

• Higher profits due to fewer bad debts

• Loss of customers and reduced business volume

• Faster payment collections

Which of the following is a key responsibility of a credit manager?

• Approving sales targets

• Supervising credit investigations

• Setting company-wide policies

• Evaluating employee performance

Why is credit evaluation important before granting credit?

• It helps determine sales projections.

• It ensures compliance with government regulations.

• It helps assess a customer's ability to repay and reduces the risk of bad debts.

• It simplifies the payment process for customers.

What type of customer is likely to have their credit privileges suspended?

• Customers who always pay on time

• Slow-paying customers

• First-time customers

• Customers who purchase in bulk

A credit manager is only responsible for deciding whether to grant or deny credit.

• True

• False

The credit department must closely collaborate with the sales department to ensure smooth operations.

• True

• False

The evaluation phase of credit management involves reviewing the company's credit policies and adjusting them if needed.

• True

• False

Estimation of credit risk is unnecessary when dealing with long-time customers who have a history of on-time payments.

• True

• False