All of the Following Are Problems Associated with Using the Z-Score

question 7

Multiple Choice

All of the following are problems associated with using the Z-score model to make credit risk evaluations EXCEPT:

• A) the model does not benchmark firms to the average in the industry.
• B) the model does not use important data that is difficult to quantify such as the phase of the business cycle.
• C) the model categorizes firms as either high risk or low risk.
• D) All of the options are problems associated with using the Z-score model.

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Definitions:

Paleozoic Sedimentary Units

Layers or formations of sedimentary rock created during the Paleozoic era, documenting ancient environmental conditions.

Precambrian Rocks

Geological formations dating from the period before the Cambrian, over 541 million years ago, representing Earth's earliest history.

Depositional Contact

The surface or boundary between two layers of rock where new sediment layers accumulate on top of existing ones.

Angular Unconformity

A geological feature where tilted or folded sedimentary rocks are overlain by younger, more flat-lying strata, indicating episodes of deformation and erosion.