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CLASSES AND KINDS OF CREDIT

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venessa garcia

on 4 October 2014

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Transcript of CLASSES AND KINDS OF CREDIT

CLASSES AND KINDS OF CREDIT
1.) PERSONAL CREDIT
Most personal credit, by and large, is used by individuals to buy consumer goods intended to provide immediate satisfaction to their wants and needs. They are also called Consumer Credit.
Personal Credit
KINDS OF CONSUMER CREDIT
1.) Charge Account - Oldest form of sales or purchase credit. Other names for this kind of credit are Open-book Credit, Open Charge Account, and 30-Day Credit
ADVANTAGES OF CHARGE ACCOUNT
1.) It is a very convenient way of shopping.
2.) It eliminates the inconvenience as well as the danger of carrying too much money.
3.) Charge accounts enable customers to buy goods only at the time they want them.
4.) Charge account enables consumers to obtain goods even before they have the money.
ADVANTAGES OF CHARGE ACCOUNT
5.) Charge accounts provide a valuable means of reference in many business transactions.
DISADVANTAGES OF CHARGE ACCOUNT
1.) Unless absolutely necessary, it should not be made at all if the cost is not within the budget allowance for such an item.

2.) The dangers in charge accounts, unless carefully controlled, are that non-essentials will be purchased w/o much consideration.

DISADVANTAGES OF CHARGE ACCOUNT
3.) Less care will be used to get the most value for the money spent than when the purchase is made for cash.

4.) Amounts being charged from time to time will not be kept in mind, so that the total amount which must be paid when the reckoning comes will not be realized until late
DISADVANTAGES OF CHARGE ACCOUNT
5.) Thus, the buyer ties up too much of his future income for the payment of bills, loans and installments. Then he may have to skimp of food and other necessities in order to keep up with the payments.
DISADVANTAGES OF CHARGE ACCOUNT
6.) He may not have sufficient money left over as a reserve to meet unexpected emergencies.
USE OF CREDIT CARDS
This type of device serves to identify credit customers as those to whom the store has given a symbol of its confidence in them.
INSTALLMENT CREDIT
This is the most common type of consumer credit. A number of individuals term it as "buying on time".

By bringing all consumer durables within the reach of most families, the mechanism of installment buying makes mass production and low prices possible.
PRECAUTIONS IN BUYING INSTALLMENT
1.) Never allow yourself to be rushed or pressured into signing a contract until you became conversant with all the facts.
2.) Always insist for an extra copy of thr contract.
3.) Never sign any contract before all the blank spaces are filled in.
4.) Read again after signing.
INSTALLMENT CREDIT
Through this method, the buyer is often asked to make a partial payment at the time of purchase, termed "down payment". The balance is is expected to be paid with a series of regular payments.
INSTALLMENT CREDIT
As a policy and practice, a buyer of goods on installment credit is required by the selling company to sign a company agreement known as an "installment contract".
REVOLVING CHARGE ACCOUNT
The amount a customer can owe the store at any one time on a revolving account is limited- the limit based on how much the customer earns and what other expenses he has to meet. Once the impsed limit is reached, new further amounts can be charged against the account until a payment has been made.
PERSONAL LOAN
A person may borrow for a number of purposes, such as to pay cash, for an appliance, for the repair of the house, to pay for medical expenses or to cover one's expenses to travel abroad.
ECONOMICS OF CONSUMER CREDIT
When credit is extended, an individual or a business house buys goods in return for a promise to pay for these goods at some future time. Credit then, as repeatedly stated before, on future promise to pay. That promise may either be "implied" or "expressed."
SALE OF GOODS ON CREDIT TO THE POOR
SALE OF GOODS ON CREDIT TO THE POOR
This was laid down for the expansion of economic opportunities with the approach ranging from making education within the reach of the masses to such proposals as job training and job creation.
MERCANTILE CREDIT
It is equally known as "commercial credit."Sometimes, it is also called "trade credit." It is granted by manufacturers, wholesalers, and jobbers as an accident of sale. Unlike consumer credit which is intended to facilitate the process of consumption, this kind of credit is designed to increase the volume of sales.
UNDER MERCANTILE CREDIT
1.) Mercantile Credit/Retail Credit
2.) Raising Money On Accounts Receivable
3.) Credit Terms
BANK CREDIT
Bank credit comprises the aggregate of all the funds advanced in various ways by banks to other members of the community.
TYPES OF TRANSACTIONS COMMERCIAL BANKS FINANCE
1.) Commercial Loans
2.) Agricultural Loans
3.) Industrial Loans
4.) Real Estate Loans
5.) Personal Loans
6.) Packing Credit Advances
7.) Trust Receipts
8.) Limit to Expansion of Bank Credit
INVESTMENT CREDIT
This consists of advances that have been made to a business enterprise to enable it to purchase or construct the necessary plant and equipment.
AGRICULTURAL CREDIT
With hunger and starvation haunting the lives of segments of the world's population, increasing focus is made on the need to increase food production, accelerating agricultural development
AGRICULTURAL CREDIT
EXPORT CREDITS
The ability of the man, whether he be an export executive or a special credit manager, who extends credit to customers in other countries of the world, depends upon willingness to assume responsibility to a reasonable extent in extending such credits to enlarge business of his concern w/o unreasonable risk.
PUBLIC CREDIT
1.) Financing Government Expenditure
2.) Public Borrowing in Developing Countries
3.) Philippine Government's Authority to Borrow
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