One of the key inputs to the final credit decision is a credit analyst’s subjective judgment of a firm’s creditworthiness since it can provide a better feel of a firm’s operation than any quantitative figures. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Joe Manufacturing uses 2,400 units of a product per year on a continuous basis. The product carrying costs are $60 per year and ordering costs are $250 per order. It takes 20 days to receive a shipment after an order is placed and the firm requires a safety stock of 8 days of usage in […]
Date: September 19th, 2020
A firm’s credit selection procedures must be established on a sound economic basis that considers the costs of investigating the creditworthiness of a customer and the expected size of its credit purchases. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
One of the components of a cash conversion cycle is the average collection period. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A firm’s credit standard is a procedure for ranking an applicant’s overall credit strength, derived as a weighted average of scores on key financial and credit characteristics. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
bonds pay coupon interest in the form of additional bonds instead of cash. a. Deferred coupon b. Payment-in-kind c. Zero-coupon d. In lieu ANSWER B
Date: September 19th, 2020
A firm’s credit selection is the process of determining the minimum requirements for extending credit to a customer. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Credit analysts usually analyze an applicant’s creditworthiness by using the dimensions of credit such as character, capacity, capital, collateral, and conditions. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A speculative-grade bond that had an investment-grade rating when it was originally issued is called a (i), while an original-issue speculative-grade bond is called a (ii). (i) (ii) a. revised-down bond junk bond b. berated bond fallen angel c. junk bond fallen angel d. fallen angel junk bond ANSWER D
Date: September 19th, 2020
Credit selection involves application of techniques for determining which customers should receive credit. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
