question archive This is true or False please also provide explanations why such answer
This is true or False please also provide explanations why such answer
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This is true or False please also provide explanations why such answer.
- Bad debts reserve shall be made when a receivable is deemed to be uncollectible due to a customer's inability to pay. (True or False)
- Accounts receivables selling helps a company speed up its cash flow, thereby enabling it to more readily pay its current obligations and grow. (True or False)
- When a customer/borrower wants to know how much balance he or she has reflecting his/her purchases on credit/borrowings and payment during a given period, a monthly statement of account should be prepared for him. (True or False)
- Unlike nonrecourse factoring, a factoring client would not be required to exchange or repurchase invoices in the case of non-payment by customer. (True or False)
- The Deed of Assignment acts a main document between the buyer and seller to show proof of ownership in favor of the seller. (True or False)
- There is no better source of information about a business than the business itself. Direct contact with the principals provides the credit executive with financial details, bank and trade references, and other information of importance. (True or False)
- The turnover of accounts receivables may be calculated by finding the relationship between the average balance of the book of accounts and the credit sales for the period. (True or False)
- In layman's terms, a non recourse factoring program is one where the client agrees to be ultimately responsible for the invoice if a client's customer does not pay within the recourse period. (True or False)
- As a matter of principle, borrowers almost always favor recourse loans, while lenders almost always favor non-recourse loans. (True or False)
- If the bad debt reserve is accurately estimated, then a company's net income will not be reduced when the debts are actually written off as being uncollectable. (True or False)
- Model Inventory is a Model documentation that is understandable and sufficiently detailed to allow for precise replication should the need arise. (True or False)
12.Validate the preliminary risk assessment conclusions by conducting on-site transaction testing. The purpose of working these samples includes the following EXCEPT:
a.verifying adherence to bank policies.
b.determining whether the bank maintains adequate documentation of analysis and decisions.
c.verifying whether MIS reports accurately capture exception information.
d.determining whether practices exist that are inconsistent with bank policy or are not
e.adequately depicted in existing management reports.
f.Evaluate management and the planning process
13.Regular monthly payments add structure and discipline to the lending arrangement, provide regular and ongoing contact between the bank and the borrower, and allow the borrower to demonstrate and the bank to assess continued willingness and ability to repay the obligation over time .What is it?
a.Deed of Assignment
b. Surety bond
c. Asset Securitization
d.Deferred payment programs
e. Letters of Credit
14.You can increase your credit score if you:
a.have additional credit inquiries.
b.have a history of late payments.
c.successfully manage several types of credit.
d.borrow more.
15.One difference between a debit card and a credit card is that
a.debit cards generate unsecured debt.
b.debit cards can only be used for large transactions.
c.payments made with a debit card are immediately deducted from your bank account.
d.debit cards provide better consumer protection.
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1. False When customer is unable to pay back the debt is written off. A bad debt reserve is normally put in place at your financial year end once you have taken the view that any outstanding payments by customers will not be paid in the new financial year.
2. True. This process of selling accounts receivables is called factoring. The buying party pays a discounted amount for the receivables up front and collects it eventually from the debtors.
3. True. Monthly statements depicts the transactions for a month and must be provided to the customer.
4. False. Only in non recourse factoring does the client not have the obligation of absorbing any unpaid invoices and the loses are absorbed by the factor.
5. True. Assignment of rights over ownership through the deed, defines the legal rights and obligations over the property
6. False. Principals will never provide credit details
7. False. Accounts receivables turnover is calculated as credit sales / (avg accounts receivables) where avg AR is calculated as (beginning AR + Ending AR)/2
8. False. This happens in the recourse account type only. There is no recourse period in non recourse factoring.
9. False. In a non-recourse loan, if there's a balance due after selling the asset collateralized with the loan, the lender has to take the loss. Hence they always prefer recourse loans.
10. True. Since write off will be made only to the created reserve and not as debit to P& L.
11. I am not sure what you mean by Model Inventory. Do you mean inventory management models as discussed in this link? https://www.whatissixsigma.net/inventory-model-types/#:~:text=Inventory%20model%20is%20a%20mathematical,materials%20and%20goods%20to%20provide
Please leave clarifications as comment and i will answer this particular subdivision.
12. verifying whether MIS reports accurately capture exception information.
13. Is the question incomplete? Because absence of regular payments are unsafe especially like in deferred payment options. The exact words as in question are included in the comptrollers handbook on credit card lending found in this link: https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/credit-card-lending/pub-ch-credit-card-previous.pdf
Check out page 6, para starting as "promotional programs..." of the document. The exact statement in the question appears here.
Usually regular monthly payments are called EMI or equated monthly installments. The other options listed in the question has no relation to a borrower making such regular monthly payments.
14. Successfully manage credits.
15. Payments made with the debit card is immediately debited from the bank account. However in credit card payments, the credit is settled at the end of the billing cycle.
