Data Analysis & Decision Making Flashcards
7 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Data Analysis & Decision Making flashcards as text
In a credit risk model, a confusion matrix shows 90 true positives, 10 false negatives, 15 false positives, and 85 true negatives. What is the model's precision?
Answer: 85.7%
Precision = True Positives / (True Positives + False Positives) = 90 / (90 + 15) = 85.7%.
A credit manager uses a decision tree model to approve or deny credit. The model's primary advantage in a credit context is:
Answer: It provides interpretable, rule-based outputs that can be explained to applicants
Decision trees produce human-readable if-then rules, which are valuable for regulatory compliance and explaining credit decisions to applicants.
Which metric is most useful for assessing the efficiency of a company's collection efforts relative to its credit sales?
Answer: Collection effectiveness index (CEI)
The Collection Effectiveness Index measures what percentage of receivables that could have been collected in a period were actually collected.
When analyzing a customer's financial statements, a credit manager observes that inventory turnover has dropped significantly while receivables turnover remains stable. This most likely indicates:
Answer: Potential product obsolescence or weakening sales demand
A declining inventory turnover with stable receivables turnover suggests the company is struggling to sell inventory, signaling possible obsolescence or demand issues.
A credit department tracks the percentage of invoices disputed by customers. This metric is best classified as:
Answer: A lagging indicator of customer satisfaction and invoice accuracy
Dispute rates are lagging indicators reflecting past invoice accuracy, billing process quality, and customer satisfaction after delivery.
In Altman's Z-Score model, which financial ratio captures a company's ability to generate earnings relative to its total assets?
Answer: EBIT / Total assets
The EBIT / Total assets ratio in the Z-Score model measures asset productivity and is designated as X3 in Altman's original formula.
A credit manager wants to segment 5,000 customers into risk tiers without predefined categories. Which analytical approach is most appropriate?
Answer: K-means clustering
K-means clustering is an unsupervised technique that groups data points into a specified number of clusters based on similarity, ideal when categories are not predefined.