Credit Risk Is

question 52

Multiple Choice

Credit risk is:

• A) the risk of a borrower defaulting on a loan.
• B) lower, the longer the length of the loan.
• C) lower, the larger the amount of the loan.
• D) the risk of not being able to get a loan when your credit is good.

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Definitions:

Direct Write-off Method

An accounting method where uncollectible debts are written off as an expense only when they are confirmed to be uncollectible.

Materiality Constraint

An accounting principle that allows for ignoring minor discrepancies that would not affect the decision-making process of users of financial statements.

Uncollectible Account Receivable

An accounting term for receivables from sales that are considered not collectible, resulting in a bad debt expense.

Uncollectible Accounts

Accounts receivable that a company does not expect to collect and thus writes off as a loss.