NACM CBA Practice Test – Certified Business Accountant Exam Review Questions
and Study Guide
Which of the following descriptions is appropriate to explain what is meant by the 5th "C" of
Credit Conditions?
-The condition of an applicant's office space, warehouse, or distribution center.
-The financial condition of an applicant based on its financial statements. option 2
-Those moral qualities and actions of a credit applicant which oblige the applicant to pay as
debts are due.
-The current and expected general economic situations as they might affect the applicant. -
correct answer ✔✔-The current and expected general economic situations as they might affect
the applicant.
Character: willingness of debtor to pay debt (ethics)
Capacity: short term debt...can customer pay debt as it's due?
Capital: long term debt....will customer be in business in 5 years?
Collateral: assets need to recover debt
Conditions: external events that interrupt and disturb flow of business
Also consider: Competition and Common Sense
Business Credit Principles, 7th Edition, page 7.
Public credit can be defined as:
-The extension of credit to, or borrowing by, units of government, states and municipalities as
well as the federal government.
-The extension of credit to or used by the general public or individuals.
,-The extension of credit to or used by publicly held companies.
-The extension of credit to or used by both the general public and publicly held companies. -
correct answer ✔✔-The extension of credit to, or borrowing by, units of government, states and
municipalities as well as the federal government.
Business Credit Principles, 7th Edition, page 9.
Availability Float can be defined as:
-The delay between the time an invoice is mailed and the time the buyer mails the check.
-The delay between the time a check is deposited at the bank and the time a depositor's
account is credited with the collected funds.
-The delay between the time an invoice is mailed and the time the buyer receives the invoice.
-The available discount offered by the seller. - correct answer ✔✔-The delay between the time a
check is deposited at the bank and the time a depositor's account is credited with the collected
funds.
Business Credit Principles, 7th Edition, page 22.
Information contained on the MICR line of a check does not include:
-The Federal Reserve district number in which the drawee's bank is located.
-The drawee's account number.
-The payor's account number.
-Business and consumer borrowing is encouraged. - correct answer ✔✔-The drawee's account
number.
Business Credit Principles, 7th Edition, page 19.
,If the Federal Reserve buys securities, which of the following is true?
-Bank reserves decrease.
-Bank reserves increase.
-Interest rates fall.
-Business and consumer borrowing is encouraged. - correct answer ✔✔-Bank reserves increase.
Business Credit Principles, 7th Edition, page 19.
If the Federal Reserve sells securities, which of the following is true?
-Bank reserves decrease.
-Bank reserves increase.
-Fewer funds are available for loans.
-Interest rates rise. - correct answer ✔✔-Bank reserves decrease.
Business Credit Principles, 7th Edition, page 19.
Net working capital can be summarized by the following equation:
-Net Working Capital = Current Assets + Current Liabilities
-Net Working Capital = Current Assets + Owner's Equity
-Net Working Capital = Current Assets - Current Liabilities
-Net Working Capital = Owner's Equity - Current Liabilities - correct answer ✔✔-Net Working
Capital = Current Assets - Current Liabilities
, Business Credit Principles, 7th Edition, page 30.
The benefits of a centralized credit department do not include:
-Consistency and control.
-Economies of scale.
-Having multiple on-site locations at branches.
-Ease of training. - correct answer ✔✔-Having multiple on-site locations at branches.
Business Credit Principles, 7th Edition, page 50.
The term "price discrimination" could include which of the following business practices:
-Charge one customer for freight, and not another.
-Granting like terms to customers.
-Charging different prices because of different costs in the making of the product.
-None of the above. - correct answer ✔✔-Charge one customer for freight, and not another.
Business Credit Principles, 7th Edition, page 67.
The concept of U.S. Antitrust Regulation is:
-To prevent monopolies and unfair restraints of trade.
-To prevent price discrimination that would reduce competition.
-To encourage and protect competition.
and Study Guide
Which of the following descriptions is appropriate to explain what is meant by the 5th "C" of
Credit Conditions?
-The condition of an applicant's office space, warehouse, or distribution center.
-The financial condition of an applicant based on its financial statements. option 2
-Those moral qualities and actions of a credit applicant which oblige the applicant to pay as
debts are due.
-The current and expected general economic situations as they might affect the applicant. -
correct answer ✔✔-The current and expected general economic situations as they might affect
the applicant.
Character: willingness of debtor to pay debt (ethics)
Capacity: short term debt...can customer pay debt as it's due?
Capital: long term debt....will customer be in business in 5 years?
Collateral: assets need to recover debt
Conditions: external events that interrupt and disturb flow of business
Also consider: Competition and Common Sense
Business Credit Principles, 7th Edition, page 7.
Public credit can be defined as:
-The extension of credit to, or borrowing by, units of government, states and municipalities as
well as the federal government.
-The extension of credit to or used by the general public or individuals.
,-The extension of credit to or used by publicly held companies.
-The extension of credit to or used by both the general public and publicly held companies. -
correct answer ✔✔-The extension of credit to, or borrowing by, units of government, states and
municipalities as well as the federal government.
Business Credit Principles, 7th Edition, page 9.
Availability Float can be defined as:
-The delay between the time an invoice is mailed and the time the buyer mails the check.
-The delay between the time a check is deposited at the bank and the time a depositor's
account is credited with the collected funds.
-The delay between the time an invoice is mailed and the time the buyer receives the invoice.
-The available discount offered by the seller. - correct answer ✔✔-The delay between the time a
check is deposited at the bank and the time a depositor's account is credited with the collected
funds.
Business Credit Principles, 7th Edition, page 22.
Information contained on the MICR line of a check does not include:
-The Federal Reserve district number in which the drawee's bank is located.
-The drawee's account number.
-The payor's account number.
-Business and consumer borrowing is encouraged. - correct answer ✔✔-The drawee's account
number.
Business Credit Principles, 7th Edition, page 19.
,If the Federal Reserve buys securities, which of the following is true?
-Bank reserves decrease.
-Bank reserves increase.
-Interest rates fall.
-Business and consumer borrowing is encouraged. - correct answer ✔✔-Bank reserves increase.
Business Credit Principles, 7th Edition, page 19.
If the Federal Reserve sells securities, which of the following is true?
-Bank reserves decrease.
-Bank reserves increase.
-Fewer funds are available for loans.
-Interest rates rise. - correct answer ✔✔-Bank reserves decrease.
Business Credit Principles, 7th Edition, page 19.
Net working capital can be summarized by the following equation:
-Net Working Capital = Current Assets + Current Liabilities
-Net Working Capital = Current Assets + Owner's Equity
-Net Working Capital = Current Assets - Current Liabilities
-Net Working Capital = Owner's Equity - Current Liabilities - correct answer ✔✔-Net Working
Capital = Current Assets - Current Liabilities
, Business Credit Principles, 7th Edition, page 30.
The benefits of a centralized credit department do not include:
-Consistency and control.
-Economies of scale.
-Having multiple on-site locations at branches.
-Ease of training. - correct answer ✔✔-Having multiple on-site locations at branches.
Business Credit Principles, 7th Edition, page 50.
The term "price discrimination" could include which of the following business practices:
-Charge one customer for freight, and not another.
-Granting like terms to customers.
-Charging different prices because of different costs in the making of the product.
-None of the above. - correct answer ✔✔-Charge one customer for freight, and not another.
Business Credit Principles, 7th Edition, page 67.
The concept of U.S. Antitrust Regulation is:
-To prevent monopolies and unfair restraints of trade.
-To prevent price discrimination that would reduce competition.
-To encourage and protect competition.
