One Way Businesses Try to Overcome the Risk Associated with New

question 65

True/False

One way businesses try to overcome the risk associated with new customers is to access a credit scoring report that will predict the probability of a customer causing credit problems in the future.

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Definitions:

Constant Growth DCF Model

A method of valuing a company using the theory that its stock is worth the sum of all its future cash flows, discounted back to their present value at a constant growth rate.

Perpetual Preferred Stock

A type of preferred stock with no fixed maturity date, where dividends must be paid by the company before dividends are paid to common stockholders.

Expected Return

The weighted average of all possible returns for an investment, with weights representing the probabilities of each outcome.

Required Return

The minimum gain investors expect from an investment, considering its risk level; synonymous with required rate of return.