QUESTION 1

Which of the following will decrease the net present value associated with extending trade credit to a customer?

	a.	Increase in the discount rate
	b.	Decrease in the discount rate
	c.	Decrease in credit administration expenses
	d.	Decrease in the variable cost ratio

QUESTION 2

Late payments by customers may lead to which of the following?

	a.	Reduced shareholder value for the seller
	b.	Higher interest expense for the seller
	c.	An increase in the length of trade credit from suppliers
	d.	All are correct

QUESTION 3

Which of the five C's of credit provides an indicator of a customer's willingness to pay?

	a.	Capacity
	b.	Collateral
	c.	character
	d.	Conditions

QUESTION 4

Which of the following data might be used to assess the character component of credit standards?

	a.	Number of employees
	b.	Location of the business
	c.	Average profits for the past 3 years
	d.	Past payment records