Based on the Moody's KMV model which of the following is not correct? A: Growth variables are important for default analysis. rapid growth will lead to lower probability of default and rapid decline will lead to higher probability of default. B: Activity ratios are relevant for default analysis. A large stock of inventories relative to sales will lead to a higher probability of default.

Question

Quizplus · Accepted Answer

Statement A is true according to the Moody's KMV model, but statement B is not. The Moody's KMV model does not consider activity ratios such as inventories relative to sales as relevant for default analysis.

Based on the Moody's KMV Model Which of the Following