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

question 64

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 these are problems associated with using the Z-score model.

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Definitions:

Formal Operational Stage

The fourth stage in Jean Piaget’s theory of cognitive development, typically beginning around age 11, marked by the ability to think abstractly and reason logically.

Concrete Operational

A stage in Piaget's theory of cognitive development where children ages 7-12 develop logical thinking but still struggle with abstract concepts.

Moral Reasoning

The process of determining right from wrong in a logical, systematic way, often based on ethical principles.

Automatic Feelings

Emotions or responses that occur without conscious thought, often as instinctive reactions to certain stimuli.