Page 514 - Business Principles and Management

C HAPTER 18 A SSESSMENT
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CHAPTER CONCEPTS

• To accept credit cards, a business must establish a relationship with a
bank and a credit card company. Some firms both offer their own store
credit card and accept credit cards. Others offer installment plans.
• Debit cards are a way to make electronic payments by immediately
withdrawing cash from the cardholder’s bank account and crediting
the payment to the seller’s account. They can be used to buy products
and withdraw cash from ATMs. Smart cards can perform all the
functions of credit, debit, and ATM cards.
• Businesses obtain information on customers’ creditworthiness from
credit applications and credit bureau ratings. Ratings are based on
the four Cs: character, capacity, capital, and conditions.
• Effective collection procedures and aging of accounts receivable are
two ways to manage credit sales. As a last resort, businesses may
work out alternative payment plans with delinquent customers, use
a collection agency, or take legal action.
• Managers must find ways to identify and reduce risks. Businesses
may purchase property insurance, vehicle insurance, insurance on
people, liability insurance, bonding, and international insurance.

• Many risks, such as weather and economic conditions, cannot be in-
sured. Managers must be prepared to respond to noninsurable risks.

REVIEW TERMS AND CONCEPTS

Write the letter of the term that matches each definition. Some terms will
not be used.

1. Measure of a credit applicant’s current financial worth or ability to
a. affinity credit cards
pay based on assets
b. aging of accounts
2. Credit plan in which customer agrees to make a stated number of
c. bonding
payments over a fixed period of time at a specified interest rate
d. capacity
3. Persons who represent the insurance company and sell insurance to
e. capital
individuals and businesses f. character
4. Possible financial loss that a policyholder will suffer if the property g. co-branded credit cards
is damaged or destroyed h. credit agency
5. Insurance that protects against losses from injury to people or their i. debit card
property that result from a business’s products, services, or operations j. disability insurance
6. Private company that acts as an intermediary between a business k. installment credit
and credit card companies to establish and maintain credit services l. insurable interest
7. Risk management tool that limits financial loss from uncontrollable m. insurance
n. insurance agents
events in exchange for regular payments
o. liability insurance
8. Insurance plan in which each insurance company must pay the
p. malpractice insurance
losses of its insured when an accident occurs, regardless of who was
q. merchant account
responsible for the accident
provider
9. Clearinghouse for information on the creditworthiness of individu- r. no-fault insurance
als or businesses s. smart card
10. Credit cards associated with specific organizations and offered to
people affiliated with those organizations

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