CMCP CHAPTER 5 QUESTIONS WITH
CORRECT DETAILED ANSWERS 2025
Credit - ANSWER- a contractual agreement in which a borrower receives something of
value now and agrees to repay the lender at some date in the future, generally with
interest
five Cs of credit - ANSWER- a system used by lenders to gauge the creditworthiness of
potential borrowers. The system weighs five characteristics of the borrower and
conditions of the loan
character, capacity, capital, collateral, and conditions - ANSWER- What are the five Cs
of credit
Character - ANSWER- It refers to credit history: a borrower's reputation or track record
for repaying debts. This information appears on the borrower's credit reports
Credit reports - ANSWER- _________ contain detailed information about how much an
applicant has borrowed in the past and whether they have repaid loans on time. These
reports also contain information on collection accounts and bankruptcies, and they
retain most information for seven to 10 years.
Capacity - ANSWER- measures the borrower's ability to repay a loan by comparing
income against recurring debts and assessing the borrower's debt-to-income (DTI) ratio.
Capital - ANSWER- is the money personally invested by the debtor in a business and is
an indication of how much risk it has as well as the chance that the business will fail.
collateral - ANSWER- can help a borrower secure loan. It gives the lender the
assurance that if the borrower defaults on the loan, the lender can get something back
by repossessing the ________
Conditions - ANSWER- Refers to interest rate and amount of principal, influence the
lender's desire to finance the borrower. It can also refer to how a borrower intends to
use the money
credit application - ANSWER- The first activity in the Credit Department as it starts the
actual operation of its function is the __________
True - ANSWER- True or False. To guide the credit applicant, it would be good practice
to give a listing of all the company requirements upon his signifying his intention to
apply for such a credit accommodation or loan
