Describe the two-stage process for establishing credit standards.

1. First, the company must establish credit acceptance criteria that represent a maximum amount of payment risk the company is willing to assume.

2. ??

Describe three considerations companies must evaluate when establishing a method of analyzing credit requests.

1. The type of information

2. ??

3. The cost of information

Describe four external sources companies can use to determine the creditworthiness of a credit applicant.

1. ??

2. Trade references, or other companies from whom the applicant has purchased on credit, can provide a secondary source of information about the applicants payment performance.

3. Banks or other financial creditors (e.g., commercial finance or leasing companies) can provide standardized credit information about an applicants financial condition and available credit.

4.??

Describe the four-step credit scoring process major issuers of retail credit use for consumer credit analysis.

1. Differentiating standard and high-risk accounts based on the applicants monthly income, outstanding obligations and employment history

2. Weighting the characteristics of applicants who fit into each category to establish creditworthiness

3. ??

4. Applying further analysis to applicants whose scores fall between the cutoff points

Describe four disadvantages of accepting credit cards for customer financing.

1.??

2. The seller loses promotional opportunities by not having access to a list of credit customers.

3. ??

4.??

Describe four reasons that motivate the holding of inventory.

1. ??

2. As a precautionary measure

3. ??