Credit Policies and Sales Transactions Quiz
Explore credit management with 14 questions. Assess your understanding of credit terms, policies, and risks in business transactions.
#1
Which of the following is NOT a commonly used credit policy?
Net 30
Net 60
Cash on delivery
Net 90
#2
What does 'Net 30' credit terms mean?
Payment is due within 30 days of the invoice date
Payment is due within 30 days of the shipment date
Payment is due within 30 days of the order date
Payment is due within 30 days of receiving the goods
#3
What is the purpose of a credit application?
To increase interest rates
To establish credit terms
To decrease sales
To reduce customer loyalty
#4
What does 'COD' stand for in credit terms?
Cash on Demand
Credit on Delivery
Cash on Delivery
Credit on Demand
#5
What is the purpose of a credit policy?
To increase customer satisfaction
To establish guidelines for granting credit
To discourage sales
To complicate payment procedures
#6
Which of the following is a risk associated with liberal credit policies?
Increased sales
Higher bad debts
Improved cash flow
Decreased customer loyalty
#7
What does 'Credit terms 2/10, net 30' mean?
A 2% discount is available if payment is made within 30 days
A 10% discount is available if payment is made within 2 days
A 2% discount is available if payment is made within 10 days
A 30% discount is available if payment is made within 2 days
#8
Which of the following is a characteristic of a restrictive credit policy?
Higher sales volume
Increased bad debt expense
Tighter credit terms
Generous credit limits
#9
Which of the following is an advantage of offering cash discounts?
Reduced cash flow
Increased accounts receivable
Improved liquidity
Higher bad debts
#10
Which of the following is NOT a component of credit terms?
Credit limit
Payment terms
Discount terms
Sales tax
#11
What is the primary objective of implementing credit policies?
To increase costs
To decrease sales
To reduce risk
To limit profits
#12
Which of the following is NOT a factor considered in evaluating creditworthiness?
Credit score
Income level
Gender
Payment history
#13
What is the purpose of aging accounts receivable?
To speed up cash inflows
To delay payments to suppliers
To determine the average age of customers
To assess the creditworthiness of customers
#14
Which of the following is NOT a common method for managing credit risk?
Credit scoring
Financial statement analysis
Random selection
Trade references
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