LUCY COLLEGE

DIRE DAWA CAMPUS

Final Exam of Process Application for credit

NAME_______________________________________ IDNo ______________

Part I: Multiple Choice Questions

1. ________contains information on the desired products, details of possible vendors, delivery
instructions, accounting details, and contact information.

A. Credit requisition C. Getting authorization

B. Credit check D. None

2. Which of the following is/are the benefit of Retail firms to sell goods on credit:

A. Meet the competition C. Better customer loyalty

B. Increase in sales D. All

3. Which of the following are the characteristics of credit sale?

A. transferor normally deals in goods and services
B. title of the goods lies with the seller before it is sold on credit
C. fewer formalities
D. It depends on terms imposed by the seller
E. All
4. __________is a sort of search performed by the retailer to evaluate a customer‘s
creditworthiness.

A. Credit check C. Credit check

B. Credit requisition D. Getting authorization

5. The information to be collected from the customers for credit check is

A. Release of information C. Address

B. Signature D. All

6. Which one of the following is first Steps to be followed before granting credit

A. Create credit policy C. Check the customer’s references

B. Customers credit application D. Run credit check

7. The maximum amount of money extended through a line of credit and the maximum amount
of credit allowed to a customer to purchase in a retail store is?

A. Credit limit C. Credit check

B. Credit requisition D. All

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8. A valid credit requisition includes:

A. The amount and type C. Report

B. The applicant‘s credit score D. All

9. To check customer’s creditworthiness the retailers should keep the following

A. Require a credit application C. Use credit evaluation tools

B. Check publicly available information D. All

10. Which the following is/are the functions of sales order which is necessary to process a
customer order:

A. Finished goods C. Subsidiary ledger

B. Shipping and billing D. Credit

Part II: Say True or False

1. Credit reporting agencies cannot measure the creditworthiness of a customer.
2. Creditworthiness is a valuation performed by the retailer that determines the possibility of a
customer to default based on his or her earlier debt obligations.
3. The buyers who want to purchase goods on credit must mention their contact information in
requisition
4. A contract of sale is a specific type of legal contract
5. A retailer must use credit evaluation tools to calculate the customer‘s creditworthiness.
6. The sales order is the interface between the various functions necessary to process a customer
order
7. Agreement to sell constitutes the terms and conditions of sale by the seller to the buyer
8. Credit check protects the interests of parties
9. Creditors must conduct credit check in order to understand whether the customers have
repaying capacity or not.
10. Credit check cannot reduce the risk of bad debts for the retailing firm

Part III: Discussion

1. List and explain the Five Cs of Credit