ADVANCED COLLECTIONS MANAGEMENT APRIL 2022 PAST PAPER

TUESDAY: 5 April 2022. Morning paper.                                                                                             Time Allowed: 3 hours.

Answer ALL questions.   Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper.

QUESTION ONE

1.          Explain the term “demand letter”.                                                                                                                  (2 marks)

Enumerate six contents of a demand letter.                                                                                                    (6 marks)

2.         List six factors that should be considered in determining the premium payable under Trade Credit Insurance. (6 marks)

3.        Explain the following terms used to measure the performance of a credit department:

Collection Effective Index (CEO.                                                                                                                   (2 marks)

Best possible days sales outstanding (DSO).                                                                                                  (2 marks)

Bad debt percentage.                                                                                                                                      (2 marks)

(Total:   20 marks)

 

QUESTION TWO

1.          Analyse three key factors that should be considered when designing a debt collection plan.                                         (3 marks)

2.         Explain five criteria that could be used to segment debt.                                                                                             (10 marks)

3.        Describe three areas of cooperation between credit department and accounts department with reference to collection of debt.                                                                                                                                                                          (3 marks)

4.        Highlight four main objectives of negotiating for a payment plan.                                                                                 (4 marks)

(Total: 20 marks)

 

QUESTION THREE

1.         Discuss five options available for enforcing a judgement issued against a debtor for recovery of debt.                      (10 marks)

2.         State five disadvantages of hiring a debt collection agency.                                                                                           (5 marks)

3.         Assess five factors that debt collectors could consider in pricing their service.                                                             (5 marks)

(Total:   20 marks)

 

QUESTION FOUR

1.         Examine four internal reasons for the high growth rate of non-performing assets (NPAs) in lending institution. (8 marks)

2.         Explain the importance of evaluating the following in the preparation of effective debt collection:

Long term focus of shareholders.                                                                                                                  (2 marks)

Return on Investment ratio.                                                                                                                            (2 marks)

Gearing levels.                                                                                                                                               (2 marks)

3.         Describe three actions a debtor could take when served with default summons.                                                           (6 marks)

(Total: 20 marks)

 

QUESTION FIVE

1.        Assess eight ways that a Credit Manager could use to improve collection procedures.                                                  (8 marks)

2.       With reference to Non-Performing Asset (NPA) describe three provisioning requirement.                                            (6 marks)

3.       Highlight three basic requirements of a Digital Collection Service Provider.                                                                  (3 marks)

4.       Discuss three disadvantages of attachment of earnings orders.                                                                                     (3 marks)

(Total: 20 marks)

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