Finance Project Ppt.

8/18/2019 Finance Project Ppt.

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University of Cebu Lapu-Lapu &

Mandaue,

Looc Mandaue City, Cebu Philippines

PROJECT in FINANCE

Kinds of Credit & Sources of Credit

Submitted by:

JULEVIE ! "#$UC%

I'% MI"C(EL M! L%)E*

M#)+ E P! P)EM#CI%

Submitted to:

$E)'#)# M! P#'IL##', CP#


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According to Type of User

! Consumer Credit

- is a debt that so.eone incurs for the purpose of

purchasin/ a /ood or service! "his includes purchases

.ade on credit cards, lines of credit and so.e loans!

- 0ind of credit e1tended to consu.ers in order to

facilitate the process of consu.ption!

- also called as 2consumption credit3


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Consu.er credit is basically the a.ount of

credit used by consu.ers to purchase non-invest.ent

/oods or services that are consu.ed and 4hose value

depreciates 5uic0ly! "his includes auto.obiles,

recreational vehicles 6)Vs7, education, boat and

trailer loans, but e1cludes debts ta0en out to

purchase real state or .ar/in on invest.ent accounts!


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There are two types of Consumer Credit

! Install.ent Credit

- the consu.er .ust repay the a.ount o4ed in

specific nu.ber of e5ual pay.ents

8! 'oninstall.ent Credit

- is a sin/le pay.ent loans and open-ended credit


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Reasons for Consumer Credit

"his type of credit arises as a result of certain .otives!

! "he desire for convenience!8! "o i.prove one9s standard of livin/!

:! "he product of necessity!

;! or e.er/encies

=! "o .a0e reservations!

>! "o ta0e advanta/e of free credit!

?! "o consolidate debts!

@! or protection a/ainst rip-offs and fraud!


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Retail Credit

is a typical e1a.ple of consu.er credit, 4hich

is held synony.ous 4ith one another as 4ith

personal credit! "he use 4hich is obtain throu/h

char/e account and install.ent credit!

Charge Account & Installment Credit Compared

a7 Install.ent buyin/ is lar/ely confined to durable

consu.er9s /oods, 4hile purchases on a char/e

account!


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b7 "he title to /oods purchased on install.ent does not

pass to the buyer until the last install.ent pay.ent has been .ade!

c7 In the event of failure on the part of the buyer to pay

the .onthly install.ent pay.ents!

d7 oods bou/ht on the install.ent plan are paid by

.eans of a series of e5ual pay.ents 4here several

purchases of /oods bou/ht on char/e account are .ay

be paid in one lu.ps!


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e7 Custo.ers 4ho buy on install.ent plan al4ays have

to pay a 2carryin/ char/e3, 4hich usually includes

interest and collection char/es!

f7 # for.al credit investi/ation of the buyer 4ould be

on install.ent plan is underta0en by sellin/ concern

before it decides to /rant credit!

/7 oods bou/ht on the install.ent basis /enerally, on

account of the considerable a.ount and a/ree.ent

4hich is not observed in the case of char/e account!


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Replevin

Ahen an article is sold under an install.ent

contract, and the buyer later fails to live up to his part

of the contract, the seller, in order to protect hi.self

fro. loss, has the ri/ht to repossess the article!

!


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2TRUTH IN LN!IN" ACT#

"his la4 provides any creditor shall furnish to

each person to 4ho. credit is e1tended, prior to the

consu..ation of the transaction!


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The following are the rules and regulation of the

$onetary %oard

!"he cash price of the property or services to be ac5uired

8! "he a.ount to be credited as do4n pay.ent or trade in!

:!"he difference bet4een the a.ount set fourth under

clauses 67 and 687!

;! "he char/es , individually ite.iBed, 4hich are paid or

to be paid by such person in connection 4ith thetransaction but 4hich are not incident to the e1tension

of credit!


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>! "he percenta/e that the financed char/e bears to the

total a.ount to be financed e1pressed as si.ple

annual rate on the outstandin/ unpaid balance of the

obli/ation


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8! $ercantile Credit

# pre-approved a.ount of .oney issued by a

ban0 to a co.pany that can be accessed by the

borro4in/ co.pany at any ti.e to help .eet variousfinancial obli/ations! Co..ercial credit is co..only

used to fund co..on day-to-day operations and is

often paid bac0 once funds beco.e available!


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$usiness .ay be e1tend to another 4hen sellin/

/oods on ti.e for resale or co..ercial also called as2commercial credit3 , a type of credit by one use!

Co..ercial credit is often used by co.panies to help

fund ne4 business opportunities or to pay for

une1pected char/es!


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:! %an' Credit

refers solely to the credit /iven by co..ercial

ban0s to business.en intended to assist then in the

operation of their business!

# ban0 credit is the a.ount of credit available to

a co.pany or individual fro. the ban0in/ syste.! It

is the a//re/ate of the a.ount of funds financial

institutions are 4illin/ to provide to an individual or

or/aniBation!


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A Revolving Credit

# revolvin/ credit is a line of credit 4here

the custo.er pays a co..it.ent fee and is then

allo4ed to use the funds 4hen they are needed! It is

usually used for operatin/ purposes, fluctuatin/ each

.onth dependin/ on the custo.erDs current cash flo4

needs!

is a co.bination of the char/e account and the

install.ent plan


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;! Investment Credit # business or/aniBation for the purchase

of fi1ed assets or to carry .ini.u. business

operation!


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Five major sources are availale from!"ic" funds for lon#$term investmentma% e secured

1. Fund of individual investors.

2. Trustees of funds of individuals and

estates.

3. Insurance companies.

4. Banin! institutions and"

#. Business concern.


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According to whether merchandise or money

is given

! $erchandise Credit %ther types of credit 4here the custo.er

obtain /oods or .erchandise in e1chan/e to his

pro.ise to pay the. at a later date!


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8! %orrowing $oney

$esides the pressin/ necessity of obtainin/

/oods and services on credit, consu.ers are li0e4ise

confronted 4ith the need for .oney 4hich they try to

obtain throu/h borro4in/!


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According to purpose

! Agricultural Credit

"hose loans 4hich are intended for the

ac5uisition of fertiliBers, pesticides, seedlin/s, and

any instru.ents, .achinery, and other .ovable

e5uip.ent used in production, processin/,

transfor.ation, handlin/ or transportation ofa/ricultural products!


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Commodity Loans the 4ord co..odity can be

defined as 2any article or product use in trade or

co..erce as collateral3

8! (port Credit

E1port trade .ay be pushed by .eans of

e1tension of credit to buyers, as is the co..on practice

and done on the basis of arrival of /oods , but beforethe buyer ta0es possession of the.!


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:! Industrial Credit

Intended for financin/ the needs of industries

li0e lo//in/, fishin/, .anufacturin/, and others , and

4hich involves bi/ a.ounts of .oney!

;! Commercial Credit

"his type of credit, 4hich is so.eti.es ter.ed

as a .ercantile credit!


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Ahen credit is secured purposely for

construction, ac5uisition, e1pansion, or i.prove.ent

of real state properties , it is ter.ed as a real state

credit!


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According to maturity

! # short ter. credit is payable 4ithin one year fro.

the date of ac5uisition!

8! Mediu. or inter.ediate ter. credit t ran/es fro.

one year to five years in .aturity!

:! Credits 4hich are intended fro. five years up belon/

to the cate/ory of a lon/-ter. credit!


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"*+RN$NT *R ,U%LIC CR!IT

Public Credit .eans a pled/in/ of the /oods

faith and the resources of the nation for the repay.ent

of a debt incurred on behalf of the people! Public debt

consist of all clai.s a/ainst the /overn.ent 4hich

.ay be payable in /oods and services, but usually in

cash!


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) * U R C )

A N ! %

A ) I ) * -

C R ! I T


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! Individual $oney Lenders

%ne of the sources of credit is the individual .oneylender 4ho .ay e lend his surplus to those in need so

that it 4ill brin/ so.e inco.e to hi.!

"he unlicensed .oney-lender, 4ho is often referred to

as a 2loan shar03, does a thrivin/ business in the /rant

of loans at every e1horbitant rates of interest!


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8! Retail )tore

Easily the bi//est source of .erchandise credit in

the Philippines is the retail store, .ore particularly in

2sari-sari3 store!

:! ,awnshops

Pa4nshop is the oldest credit institution in China!

In the Philippines , pa4n bro0in/ is also one of theoldest credit institutions and had been introduced by

*panish friars 4hen 4e re under the Cro4n of *pain!


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4.$ommercial %aper &ouse - t'e commercial paper 'ouse

is a (nancial institution t'at brin!s to!et'er t'e buyerand seller of s'ort-term commercial paper " t'at is t'e

lendin! institutions and t'e borro)in! enterprise.#.Savin!s Ban - since savin!s ban accumulate t'e smallsavin!s of depositors" suc' accumulated funds are Inturn invested in bonds or in loans secured by bonds realstate mort!a!es " and ot'er forms of security.

*.$ommercial Bans - commercial bans are en!a!ed int'e !rant of loans not only to businessman" but also toindividuals for personal purposes.


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.+ural Bans , provide t'e c'ief sources of creditespecially for t'ose en!a!ed in a!riculture )'oneeds t'ese facilities badly.

.evelopment Bans - lie t'ose of rural bans"development bans form an important part ofour banin! system e/tendin! t'e necessaryfund for purposes of 'astenin! development.

0.Investment Bans - at time termed as investment'ouses brid!e t'e !ap bet)een t'ose )'o 'aveidle funds not no)in! )'ere to invest t'em

and t'ose in dire need of suc' funds.


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.Savin!s and oan ssociations - t'at corporation en!a!ed int'e business of accumulatin! t'e savin!s of t'eir membersas stoc'olders" and usin! suc' accumulations" to!et'er )it't'eir capital in t'e case of stoc corporations" for loans and

for investments in t'e securities of productive enterprises orin securities of t'e !overnment or any of its politicalsubdivisions" instrumentalities or corporations.

1.Finance $ompanies - as an industry it s'ares )it' t'e!overnment t'e universal !oal of ac'ievin! a stron! and

'ealt'y (nancial system . It 'as t'ree cate!ories 51.6 t'einstallment sales (nance companies52.6t'e consumer (nancecompanies53.6commercial (nance companies.

11.$redit 7nions - are corporate or!ani8ation )'ic' lend savin!sto some members of t'e !roup.


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12.Insurance $ompanies - t'e business of insurancecompanies is to enter into insurance contacts )it' t'ose )'o)is' to provide suc' contin!encies as deat' or (re. T'eyreceive premiums and pay out money on t'e occurrence of

t'e particular contin!encies covered by t'e contracts.

9T&+ S97+$S

Social Security System

;overnment Service Insurance System

Industrial ;uarantee oan Fund!ricultural ;uarantee oan Fund

T'e %a!-Ibi! Fund


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BSS 9F $+IT

1.$an t'e customer pay 'is bill )'en it becomes due=

2. >ill 'e pay )'en it comes due=

.$?s of credit

1.$&+$T+

T'e c'aracter of t'e borro)er indicates 'is)illin!ness to disc'ar!e 'is (nancial obli!ation t'at

is to repay t'e loan as promised.2.$%$IT@

as basis of credit capacity si!ni(es t'e abilityto pay )'en a debt is due.


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3.$%IT

for credit purposes credit represents t'e(nancial stren!t' of t'e ris t'at is it consistof t'e amount and Auality of !oods andproperty e/pressed in terms of money )'ic'an individual or (rm possesses over andabove 'is (nancial obli!ations.

4. $9T+

must t'erefore be somet'in! of value)'ic' can be easily converted into cas'

deposited as pled!e )it' a lender to secure


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econo.ic conditions e1ert profound effectupon the /rant of loans and credits it .ay be ri/htly

.entioned that loans and credit .ay be e1tended at

certain ti.es and .ay be denied at other ti.es!

=! Country

*ince, as had been stated ti.e and a/ain, the sale of

/oods and services in any part of the 4orld on credit involves

ris0, it follo4s that every factor should be carefully considered

and scrutiniBed in so far as they affect credit ris0!


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>! Currency 'ot only is the stability of the country of

i.portant an i.portant factor to rec0on 4ith in the

consideration of credit ris0 in international tradetransactions but, e5ually so is that 4hich pertains to

that of currency! "he ris0 .ust also be ta0en into

account!


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?! Confidence

Credit is founded on confidence 4hich by far is

the principal C of credit! or any credit transaction to

ta0e place, the business 4hether he be a seller of

/oods or services on credit .ust have confidence!


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$! -inancial )tatement

# financial state.ent is a report su..ariBin/ the

financial results of an or/aniBation on any data or

record! inancial state.ents of the individual fir. are

the .ost source of financial data!


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C! Credit ,olicy Credit policies .ay vary fro. one business

enterprise to another! %ne relates to the type of

custo.ers 4ho are to be /ranted credit! %ne fir. .ay

be pri.arily interested in increasin/ the volu.e of

sales! It therefore /rants credit to all applicants and

runs the ris0 of so.e losses! %thers ta0e the

e1traordinary precautions in /rantin/ credit that could

reduce their sales volu.e!


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, a r t s o f C r e d i

t , o l i c y


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! Credit Terms

Is .eant the ter.s and conditions under 4hich

the credit is /ranted! It includes the ti.e 4hen

pay.ent .ust be .ade discounts, if any 4ill allo4 for

pro.pt pay.ent!


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8! Credit ,eriod

It refers to the len/th of ti.e 4ithin 4hich the

custo.er is e1pected to re.it pay.ent in part or in

full! If this period e1pires before pay.ent has been

.ade, the account beco.es delin5uent!


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:! Credit Limit # li.it 4ith respect to the a.ount or value that a

custo.er can obtain fro. the fir.!

#! .uantitative Credit Limit

Indicates the sellerFs Gud/.ent of the a.ount of

debt that a custo.er can incur and pay his fir.!


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$! Temporal Credit Limits

"ype of credit li.it 4hich does not lessen thea.ount of credit to 4hich a prospective borro4er or a

debtor .ay avail hi.self provided certain stipulated

re5uire.ents are accordin/ly .et and co.plied 4ith!


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, ! ) o u r c e s o f C r e d i t

I n f o r m a t i o n


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! *ources of credit infor.ation .ay be obtained fro.H

interviews with the applicant/ availing theservices of a mercantile agency 4hich has bees

established pri.arily to ascertain the credit position

of financial institutions, corporations, fir.s and

individuals!

8! Credit infor.ation .ay also be had throu/h the useof financial state.ents re5uired of applicants to

furnish their prospective creditors.


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:! Credit Mana/e.ent #ssociation of the Philippines

involvin/ .ore particularly those concernin/ frauds

and other for.s of dishonesty co..itted by

applicants for credit!

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