CREDIT MANAGEMENT APRIL 2022 PAST PAPER

MONDAY: 4 April 2022. Morning paper.                                                                                                         Time Allowed: 3 hours.

Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper.

QUESTION ONE

1.          Explain the following terms as used in credit management:

Export credit.                                                                                                                                                 (2 marks)

Trade credit.                                                                                                                                                   (2 marks)

2.        Outline four reasons why the cash operating cycle varies from industry to industry.                                                 (4 marks)

3.         Summarise six features of hire purchase credit agreement.                                                                                            (6 marks)

4.        Discuss three characteristics of borrowers that might be considered when undertaking in credit risk assessment.

(6 marks)

(Total: 20 marks)

 

QUESTION TWO

1.          Explain five ways in which trade credit has contributed in the growth of small and medium sized enterprises (SMEs) in your

country.                                                                                                                                                                        (10 marks)

2.          Differentiate between “amortised loan” and “non-amortised loan”.                                                                            (4 marks)

3.          Assess three advantages of using indirect credit information when appraising a customer’s suitability for a loan product.

(6 marks)

(Total: 20 marks)

 

QUESTION THREE

1.          Identify five parties who are allowed to access customer information from a Credit Reference Bureau (CRB).    (5 marks)

2.         List five advantages of decentralised credit departments.                                                                                               (5 marks)

3.          Analyse five risks associated with lending to a sole proprietorship.                                                                             (10 marks)

(Total: 20 marks)

 

QUESTION FOUR

1.         Differentiate between the following payment methods as used in trade credit:

“Personal cheque” and “bankers cheque”.                                                                                                       (4 marks)

“Direct debit” and “standing order”.                                                                                                                (4 marks)

2.          Discuss four types of certificates as used in export trade.                                                                                              (8 marks)

3.         Outline four mistakes that could be made during debt collection.                                                                                 (4 marks)

(Total: 20 marks)

 

QUESTION FIVE

1.          Enumerate four types of disputes that are recorded in a query register in a credit department.                           (4 marks)

2.         Outline six reports that a good credit management integrated management system (IMS) should generate.      (6 marks)

3.         Discuss the model of credit risk assessment.                                                                                                               (10 marks)

(Total: 20 marks)

 

QUESTION SIX

1.          Explain the following terms as used in insurance:

Principle of indemnity.                                                                                                                                   (2 marks)

Trade credit insurance.                                                                                                                                   (2 marks)

2.        Analyse four advantages of the letters of credit to the buyer.                                                                                         (8 marks)

3.        Describe four functional units of a credit department.                                                                                                    (8 marks)

(Total: 20 marks)

 

QUESTION SEVEN

1.       List four factors that affect accounts receivable.                                                                                             (4 marks)

Explain three hidden costs in accounts receivables.                                                                                        (6 marks)

2.      Outline six ways Pareto’s 80/20 rule assists a credit department in collection.                                                              (6 marks)

3.      Summarise four types of expenses included in the credit department budget.                                                             (4 marks)

(Total: 20 marks)

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