Name of Students: ________________________________________________________

Year/Section: ________________________________________________________
Subject: ________________________________________________________
Instructor: JOHN PAUL D. CAUILAN_________________________________

Module No.
TITLE CREDIT & THE ECONOMY; USERS, KINDS,
BASES and SOURCES OF CREDIT
INFORMATION
OVERVIEW These topics will give a background on the role and
importance of credit in the development of economy.
INTRODUCTION Understanding and promotes production and
consumption, facilitates exchange by the use of
instruments of Credit, its usefulness and introducing
it to the students the credit analysis in making sound
decision and basis for granting credit.
LEARNING OUTCOME At the end of the topics the students are able to:

1. To identify the kinds and bases of credit.

2. Familiarize the bases of credit
3. Understand the importance of credit in the
economy
4. Apply sources of credit in making sound
decisions

LEARNING OBJECTIVES In this topic, students are expected to:

1. Learn and understand credit; its uses, kinds

and bases for credit.
2. Know the implications of credit in the
economy
3. Differentiate kinds and users of credit.
4. Enumerate different credit systems.
EXERCISE # 1: ODD MAN OUT
Write the letter of the item that does not belong to the group.
__________1. A. Confidence
B. Credit Risk
C. Government Assistance
D. Creditor
__________2. A. Promise to pay
B. Future Time
C. Replevin
D. Definite sum of Money
__________3. A. Debtor
B. Creditor
C. Credit Contract
D. Money
__________4. A. Promise to pay
B. Investment credit
C. In writing
D. Legally binding
__________5. A. Character
B. Capacity
C. Confidence
D. Collateral
__________6. A. Promissory Notes
B. Pawnshop
C. Savings and loan Associations
D. Banks
__________7. A. A two party Contract
B. Involves Futurity
 C. Presence of trust and Faith
D. Definite sum of Money
__________8. A. Stability of Monetary Standard
B. It is elastic
C. Proper facilities
D. Credit Risk
__________9. A. Credit Information
B. Credit Document
C. Proper Facilities
D. Conditions
__________10. A. Re-posses
B. Replevin
C. Cash Form of Credit
D. Merchandise form of Credit
EXERCISE #2. ENUMERATION

1. NATURES OF CREDIT
A.
B.
C.
D.
2. USERS OF CREDIT
A.
B.
C.
3. KINDS OF CREDIT
A.
B.
C.
D.
E.
F.
G.
4. BASIS OF CREDIT
A.
B.
 C.
D.

EXERCISE #3. TRUE/FALSE

1. Industrial Credit is used to finance importation of goods.
2. Future time in credit is its maturity date.
3. A debtor can be imprisoned for incapacity to pay obligation.
4. Principal and interest are the things of value in credit contract.
5. Credit document includes the credit contract.
6. Replevin can be exercise for merchandise form of credit.
7. Commercial bank credit is the same with investment credit.
8. Investment credit is the combination of charge and installment account.
9. Letter of credit is the tool for export credit.
10. Mercantile credit is extended by a bank to a businessman.

EXERCISE #4. MATCHING TYPE

Match each item in Column I eith items in Column II. Write the letter only.

COLUMN 1 COLUMN II
______1. Character a. Usurers

______2. Loan Sharks b. Government corporations

extending credit
______3. Commercial Banks c. Economic or business cycle as a
basis for extending credit
______4. Development Bank d. Good moral risk of the debtor
______5. SSS, GSIS, Pag-Ibig e. Sell redeemed collateral at
auctions
______6. Capital f. Time, discount and interest rate
indicated in the credit contract.
______7. Pawnshops g. Assets of the debtor as a measure
of his capacity to pay
______8. Capacity h. Extend loans to businessman
______9. Lay-away Plan i. Consumer credit
______10. Conditions j. Debtors ability to pay
k. Extend loans for the
establishment of industries.

EXERCISE #5. IDENTIFICATION

______________ 1. This refers to the income a business generates versus the expenses it takes to
run the business analyzed over a specific time period-usually two or three years. If the business
is a start up, prepare a monthly cash flow statement for Year 1.
______________ 2. This is an overall evaluation of the general economic climate and the
purpose of the loan
______________ 3. are considered Machinery, accounts receivable, inventory, and other
business assets that can be sold if a borrower fails to repay the loan.
______________ 4. This is the owner’s personal investment in his/her business which could be
lost if the business fails. The single most common reason that new businesses fail is
undercapitalization.
______________ 5. This is an evaluation of the company’s ability to repay the loan. The bank
needs to know how you will repay the funds before it will approve your loan
______________ 6. This is a highly subjective evaluation of the business owner’s personal
history. Lenders have to believe that a business owner is a reliable individual who can be
depended on to repay the loan.
______________ 7. Loans extended to the government whether at the national, provincial or
municipal level/
______________ 8. Loans used to finance the production and marketing of agricultural products.
______________ 9. Amount/any remaining portion of the original amount.
______________ 10. The power and the ability to obtain goods or services in exchange of goods
for a promise to pay for them later.

EXERCISE #5. ESSAY

Explain the following given statements briefly but substantially.
1. What is the relevance of credit system in the economy?
2. Differentiate the advantage and disadvantage of credit.
3. Enumerate the basis of credit and explain.
4. What are the qualities(details) needs to investigate in gathering credit
sources/information.