CCM Trade Credit & Accounts Receivable Flashcards
6 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CCM Trade Credit & Accounts Receivable flashcards as text
Trade credit is BEST defined as:
Answer: Credit extended by one business to another for the purchase of goods or services
Trade credit is the deferred payment arrangement between a seller and a buyer in a business-to-business transaction.
Which of the following BEST describes 'open account' terms in trade credit?
Answer: Goods are shipped and invoiced with payment expected within an agreed period
Open account terms ship goods on invoice with payment expected by a due date, relying on trust and the buyer's creditworthiness.
What is the primary advantage of factoring accounts receivable for a seller?
Answer: It converts receivables to immediate cash, improving liquidity
Factoring accelerates cash flow by selling receivables at a discount, providing immediate working capital.
A 'recourse' factoring arrangement means:
Answer: The seller must buy back uncollected invoices from the factor
In recourse factoring, the seller retains the credit risk and must repurchase invoices the factor cannot collect.
Which document serves as legal evidence of a buyer's obligation to pay in a trade credit transaction?
Answer: Promissory note or trade acceptance
A promissory note or trade acceptance is a legally enforceable instrument acknowledging the buyer's obligation to pay a specific sum.
The Uniform Commercial Code (UCC) Article 9 is relevant to trade credit because it governs:
Answer: Secured transactions and the perfection of security interests in personal property
UCC Article 9 governs secured transactions, which is critical when a credit manager takes a security interest in a buyer's assets as collateral.