Management of Accounts Receivable WEIGHTED CREDIT SCORING SYSTEM Business organisations often grant their customers credit to increase sales but before granting potential customers credit, organisations need to obtain reliable information about the prospective applicant which needs to be verified. They also need to evaluate the creditworthiness of the applicant in order to ensure that he or she will be able to manage the repayments. In order to manage and control their credit extension process and to limit their risk exposure when extending credit, business organisations will assess their client's financial position along with establishing and developing various credit polices. With this in mind answer the following questions Woolworths Ltd. applies their credit application and credit scoring policy to assess new credit applications as part of their compliance with the National Credit Act, 34 of 2005. The company's credit application policy specifies that credit applications with credit scores above 55 are approved and those below 55 are declined. A credit analysis is based on welghts which are assigned as follows: Financial position (25%), Ability to pay (30%), Credit history (139) Unsecured assets (12%), Terms & Conditions (15%), and Years of operation (5%). The credit scores obtained by a new customer are as follows: unsecured assets (80), financial position (65), credit history (45), ability to pay (60), years in operation (50), and terms and conditions (40). 210 Answer the following questions based on the information provided above. QUESTION 1 (15) 1.1 1.2 Determine the customer's Weighted Credit Score. Should the application be approved or declined? Motivate your