CREDIT MANAGEMENT AUGUST 2022 PAST PAPER

MONDAY: 1 August 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 term “credit score”. (2 marks)

2. List five factors that a credit manager should consider when calculating a credit score. (5 marks)

3. Summarise six roles played by credit departments in achieving corporate objectives. (6 marks)

4. Distinguish between irrevocable letter of credit and revocable letter of credit. (4 marks)

Enumerate three sources of cybercrime. (3 marks)

(Total: 20 marks)

QUESTION TWO

1.  With reference to Credit Reference Bureau (CRB) Act, outline four activities carried out by (CRB). (4 marks)

2. Describe four factors that have led to low uptake of credit cards in your country. (8 marks)

3. Highlight four features of recourse factoring. (4 marks)

4. Summarise four types risks covered under credit insurance. (4 marks)

(Total: 20 marks)

QUESTION THREE

1. Outline six poor debt collection practices in a firm. (6 marks)

2. State six causes of conflict between a credit and sales department in an organisation. (6 marks)

3. Explain four services provided by an information communication technology (ICT) department to a credit department. (8 marks)

(Total: 20 marks)

QUESTION FOUR

1. Summarise five reasons why a seller would issue a credit note. (5 marks)

2. Describe four contents of a credit policy manual. (8 marks)

3. Suggest three limitations of E-payment methods in trade credit. (3 marks)

4. Suggest four roles of a credit officer. (4 marks)

(Total: 20 marks)

QUESTION FIVE

1. Discuss three objectives of credit management in an organisation. (6 marks)

2. Explain the CCC PARTS model of credit risk assessment. (8 marks)

3. List six details contained in a borrower’s credit history. (6 marks)

(Total: 20 marks)

QUESTION SIX

1. Distinguish between the following terms:

“Savings and Credit Co-operative Societies (SACCOs)” and “commercial banks”. (4 marks)

“Open item statement” and “brought forward statement”. (4 marks)

2. Outline four benefits of measuring collection performance in a credit department. (4 marks)

3. Analyse the steps that a firm should follow in setting up effective credit limits. (8 marks)

(Total: 20 marks)

QUESTION SEVEN

1. Explaining the following types of guarantees:

Bid bond. (2 marks)

Performance bond. (2 marks)

Advance payment guarantee. (2 marks)

2. Discuss four sources of information for credit risk assessment. (8 marks)

3. Identify six shortcomings of making payment by cheque. (6 marks)

(Total: 20 marks)

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