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.

Question

Quizplus · Accepted Answer

The Z-score model does benchmark firms against the industry average by comparing the firm's financial ratios to those of other firms within the same industry. This helps in assessing the firm's financial health relative to its peers.

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