An Organization Wants to Identify Its Best Customers

question 8

Essay

An organization wants to identify its best customers. What data-mining techniques can it use if all of its customer information is stored in a database?

Know the variables affecting the security market line (SML) approach to estimating expected return on a risky asset.

Differentiate between the after-tax cost of debt and the yield to maturity concerning bond prices and interest rates.

Understand how the SML approach assumes constancy in the reward-to-risk ratio and its implications for a firm's cost of equity.

Understand the financial challenges and resources available to entrepreneurs, including the difficulties of obtaining financing and the role of the Small Business Administration.

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Definitions:

Internal Control System

A process put in place by a company's management and board of directors to help ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Protect Assets

Measures and strategies implemented by a business or individual to safeguard tangible and intangible assets from loss, theft, or damage.

Internal Control Systems

Procedures and mechanisms implemented by a business to safeguard assets, enhance the reliability of financial reports, and ensure compliance with laws and regulations.

Cost-Benefit Principle

This principle involves analyzing whether the cost of an action outweighs its benefits before proceeding with the decision.