CREDIT BUSINESS ASSOCIATE (CBA) PRACTICE EXAM
NEWEST 2025- 2026 UPDATE 100 QUESTIONS & 100%
CORRECT ANSWERS GRADED A+ (BRAND NEW!!)
MOST TESTED TOPICS:
• Business Credit Principles and Policy
• Financial Statement Analysis
• Credit Risk Assessment
• Legal Aspects of Credit (UCC, Bankruptcy)
• Collection Practices and Accounts Receivable Management
1. A company’s credit policy primarily serves which purpose?
A. To maximize sales regardless of risk
B. To eliminate all bad debts
C. To balance sales growth with acceptable risk
D. To ensure all customers pay cash
Correct Answer: C
An effective credit policy balances revenue generation with risk
control.
2. Which financial statement shows a company’s financial position at a specific
point in time?
A. Income statement
B. Cash flow statement
C. Statement of retained earnings
D. Balance sheet
Correct Answer: D
The balance sheet presents assets, liabilities, and equity on a
specific date.
,3. Trade credit refers to credit extended by:
A. Banks to consumers
B. Suppliers to businesses
C. Governments to corporations
D. Investors to startups
Correct Answer: B
Trade credit allows buyers to purchase goods now and pay later to
suppliers.
4. Net 30 terms mean payment is due:
A. Within 30 days from invoice date
B. At the end of the month
C. After 60 days
D. Upon delivery
Correct Answer: A
Net 30 indicates full payment is due within 30 days of invoicing.
5. The primary purpose of a credit application is to:
A. Market products
B. Collect customer financial and legal information
C. Replace a sales contract
D. Eliminate the need for credit analysis
Correct Answer: B
Applications provide essential data for evaluating
creditworthiness.
6. A higher current ratio generally indicates:
A. Poor liquidity
B. High leverage
C. Strong short-term financial health
D. Low profitability
Correct Answer: C
Current ratio measures ability to cover short-term obligations.
, 7. Accounts receivable turnover measures:
A. Profit margin
B. Inventory movement
C. Speed of collecting receivables
D. Debt capacity
Correct Answer: C
It shows how efficiently a firm collects outstanding credit sales.
8. Which document secures a creditor’s interest in personal property?
A. Promissory note
B. UCC financing statement
C. Bill of lading
D. Purchase order
Correct Answer: B
Filing a UCC-1 perfects a security interest under the Uniform
Commercial Code.
9. A guarantor is someone who:
A. Purchases goods
B. Pays only interest
C. Promises to pay if the debtor defaults
D. Issues invoices
Correct Answer: C
Guarantees provide secondary repayment responsibility.
10.Which factor most directly increases credit risk?
A. Strong cash flow
B. High debt levels
C. Long operating history
D. Stable industry
Correct Answer: B
Heavy debt burdens raise the likelihood of default.
NEWEST 2025- 2026 UPDATE 100 QUESTIONS & 100%
CORRECT ANSWERS GRADED A+ (BRAND NEW!!)
MOST TESTED TOPICS:
• Business Credit Principles and Policy
• Financial Statement Analysis
• Credit Risk Assessment
• Legal Aspects of Credit (UCC, Bankruptcy)
• Collection Practices and Accounts Receivable Management
1. A company’s credit policy primarily serves which purpose?
A. To maximize sales regardless of risk
B. To eliminate all bad debts
C. To balance sales growth with acceptable risk
D. To ensure all customers pay cash
Correct Answer: C
An effective credit policy balances revenue generation with risk
control.
2. Which financial statement shows a company’s financial position at a specific
point in time?
A. Income statement
B. Cash flow statement
C. Statement of retained earnings
D. Balance sheet
Correct Answer: D
The balance sheet presents assets, liabilities, and equity on a
specific date.
,3. Trade credit refers to credit extended by:
A. Banks to consumers
B. Suppliers to businesses
C. Governments to corporations
D. Investors to startups
Correct Answer: B
Trade credit allows buyers to purchase goods now and pay later to
suppliers.
4. Net 30 terms mean payment is due:
A. Within 30 days from invoice date
B. At the end of the month
C. After 60 days
D. Upon delivery
Correct Answer: A
Net 30 indicates full payment is due within 30 days of invoicing.
5. The primary purpose of a credit application is to:
A. Market products
B. Collect customer financial and legal information
C. Replace a sales contract
D. Eliminate the need for credit analysis
Correct Answer: B
Applications provide essential data for evaluating
creditworthiness.
6. A higher current ratio generally indicates:
A. Poor liquidity
B. High leverage
C. Strong short-term financial health
D. Low profitability
Correct Answer: C
Current ratio measures ability to cover short-term obligations.
, 7. Accounts receivable turnover measures:
A. Profit margin
B. Inventory movement
C. Speed of collecting receivables
D. Debt capacity
Correct Answer: C
It shows how efficiently a firm collects outstanding credit sales.
8. Which document secures a creditor’s interest in personal property?
A. Promissory note
B. UCC financing statement
C. Bill of lading
D. Purchase order
Correct Answer: B
Filing a UCC-1 perfects a security interest under the Uniform
Commercial Code.
9. A guarantor is someone who:
A. Purchases goods
B. Pays only interest
C. Promises to pay if the debtor defaults
D. Issues invoices
Correct Answer: C
Guarantees provide secondary repayment responsibility.
10.Which factor most directly increases credit risk?
A. Strong cash flow
B. High debt levels
C. Long operating history
D. Stable industry
Correct Answer: B
Heavy debt burdens raise the likelihood of default.
