CBA CREDIT BUSINESS ASSOCIATE
EXAM 2025-2026 | 150+ REAL
QUESTIONS & A+ ANSWERS |
Business Credit | Financial Analysis |
UCC | Collections
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
Answer: C. To balance sales growth with acceptable risk
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
Answer: D. Balance sheet
3. What is the primary goal of business credit analysis?
A. Approve all credit applications
B. Minimize sales opportunities
C. Assess borrower's ability and willingness to repay
D. Focus only on collateral value
Answer: C. Assess borrower's ability and willingness to repay
4. Which of the following best defines "trade credit"?
A. Bank loans to businesses
B. Credit extended by suppliers to customers
C. Consumer credit card debt
D. Mortgage financing
Answer: B. Credit extended by suppliers to customers
5. A liberal credit policy typically results in?
A. Higher sales but increased risk
B. Lower sales and lower risk
C. No impact on sales volume
, D. Guaranteed collection success
Answer: A. Higher sales but increased risk
6. What does the term "5 Cs of credit" refer to?
A. Character, Capacity, Capital, Collateral, Conditions
B. Cash, Cost, Credit, Collection, Capital
C. Customer, Capacity, Cost, Collateral, Cash
D. Capital, Conditions, Capacity, Character, Cost
Answer: A. Character, Capacity, Capital, Collateral, Conditions
7. Which ratio measures a company's ability to meet short-term obligations?
A. Debt-to-equity ratio
B. Current ratio
C. Return on equity
D. Gross profit margin
Answer: B. Current ratio
8. What is the primary purpose of a credit application?
A. Marketing tool
B. Gather financial and credit information
C. Legal contract for payment
D. Sales tracking document
Answer: B. Gather financial and credit information
9. Open account terms of "2/10 net 30" mean?
A. 2% discount if paid in 10 days, full amount due in 30 days
B. 2% interest if paid in 10 days
C. Net 30 days with 2% service fee
D. 10% discount if paid within 30 days
Answer: A. 2% discount if paid in 10 days, full amount due in 30 days
10.Which is NOT a component of a typical credit policy?
A. Credit limits by customer type
B. Payment terms and discounts
C. Product pricing structure
D. Collection procedures
Answer: C. Product pricing structure
11.What does DSO (Days Sales Outstanding) measure?
A. Average collection period
B. Inventory turnover
C. Profit margin trends
D. Asset utilization
Answer: A. Average collection period
12.A conservative credit policy emphasizes?
A. Maximum sales growth
B. Risk minimization
C. Aggressive collection
D. High discount offerings
Answer: B. Risk minimization
, 13.Which document verifies a business's legal existence?
A. Purchase order
B. Articles of incorporation
C. Invoice
D. Financial statement
Answer: B. Articles of incorporation
14.What is the formula for the current ratio?
A. Current assets ÷ Current liabilities
B. Total assets ÷ Total liabilities
C. Current liabilities ÷ Current assets
D. Working capital ÷ Sales
Answer: A. Current assets ÷ Current liabilities
15.Trade credit is typically considered what type of financing?
A. Short-term, unsecured
B. Long-term, secured
C. Equity financing
D. Venture capital
Answer: A. Short-term, unsecured
16.Which is a key benefit of extending trade credit?
A. Immediate cash collection
B. Increased sales volume
C. Reduced inventory needs
D. Lower administrative costs
Answer: B. Increased sales volume
17.Credit scoring systems primarily evaluate?
A. Customer payment history and financial strength
B. Employee performance
C. Product quality
D. Market competition
Answer: A. Customer payment history and financial strength
18.What does "net 30" payment terms indicate?
A. Payment due in 30 days
B. 30% discount available
C. 30-day warranty
D. 30-day delivery guarantee
Answer: A. Payment due in 30 days
19.Which factor is NOT typically considered in credit policy design?
A. Industry payment patterns
B. Company cash flow needs
C. Competitor credit terms
D. Employee salary structure
Answer: D. Employee salary structure
20.The primary risk of extending credit is?
A. Bad debt losses
EXAM 2025-2026 | 150+ REAL
QUESTIONS & A+ ANSWERS |
Business Credit | Financial Analysis |
UCC | Collections
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
Answer: C. To balance sales growth with acceptable risk
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
Answer: D. Balance sheet
3. What is the primary goal of business credit analysis?
A. Approve all credit applications
B. Minimize sales opportunities
C. Assess borrower's ability and willingness to repay
D. Focus only on collateral value
Answer: C. Assess borrower's ability and willingness to repay
4. Which of the following best defines "trade credit"?
A. Bank loans to businesses
B. Credit extended by suppliers to customers
C. Consumer credit card debt
D. Mortgage financing
Answer: B. Credit extended by suppliers to customers
5. A liberal credit policy typically results in?
A. Higher sales but increased risk
B. Lower sales and lower risk
C. No impact on sales volume
, D. Guaranteed collection success
Answer: A. Higher sales but increased risk
6. What does the term "5 Cs of credit" refer to?
A. Character, Capacity, Capital, Collateral, Conditions
B. Cash, Cost, Credit, Collection, Capital
C. Customer, Capacity, Cost, Collateral, Cash
D. Capital, Conditions, Capacity, Character, Cost
Answer: A. Character, Capacity, Capital, Collateral, Conditions
7. Which ratio measures a company's ability to meet short-term obligations?
A. Debt-to-equity ratio
B. Current ratio
C. Return on equity
D. Gross profit margin
Answer: B. Current ratio
8. What is the primary purpose of a credit application?
A. Marketing tool
B. Gather financial and credit information
C. Legal contract for payment
D. Sales tracking document
Answer: B. Gather financial and credit information
9. Open account terms of "2/10 net 30" mean?
A. 2% discount if paid in 10 days, full amount due in 30 days
B. 2% interest if paid in 10 days
C. Net 30 days with 2% service fee
D. 10% discount if paid within 30 days
Answer: A. 2% discount if paid in 10 days, full amount due in 30 days
10.Which is NOT a component of a typical credit policy?
A. Credit limits by customer type
B. Payment terms and discounts
C. Product pricing structure
D. Collection procedures
Answer: C. Product pricing structure
11.What does DSO (Days Sales Outstanding) measure?
A. Average collection period
B. Inventory turnover
C. Profit margin trends
D. Asset utilization
Answer: A. Average collection period
12.A conservative credit policy emphasizes?
A. Maximum sales growth
B. Risk minimization
C. Aggressive collection
D. High discount offerings
Answer: B. Risk minimization
, 13.Which document verifies a business's legal existence?
A. Purchase order
B. Articles of incorporation
C. Invoice
D. Financial statement
Answer: B. Articles of incorporation
14.What is the formula for the current ratio?
A. Current assets ÷ Current liabilities
B. Total assets ÷ Total liabilities
C. Current liabilities ÷ Current assets
D. Working capital ÷ Sales
Answer: A. Current assets ÷ Current liabilities
15.Trade credit is typically considered what type of financing?
A. Short-term, unsecured
B. Long-term, secured
C. Equity financing
D. Venture capital
Answer: A. Short-term, unsecured
16.Which is a key benefit of extending trade credit?
A. Immediate cash collection
B. Increased sales volume
C. Reduced inventory needs
D. Lower administrative costs
Answer: B. Increased sales volume
17.Credit scoring systems primarily evaluate?
A. Customer payment history and financial strength
B. Employee performance
C. Product quality
D. Market competition
Answer: A. Customer payment history and financial strength
18.What does "net 30" payment terms indicate?
A. Payment due in 30 days
B. 30% discount available
C. 30-day warranty
D. 30-day delivery guarantee
Answer: A. Payment due in 30 days
19.Which factor is NOT typically considered in credit policy design?
A. Industry payment patterns
B. Company cash flow needs
C. Competitor credit terms
D. Employee salary structure
Answer: D. Employee salary structure
20.The primary risk of extending credit is?
A. Bad debt losses
