If the default probability is less than the profit margin, you should extend credit for the sale.

Name: If the default probability is less than the profit margin, you should extend credit for the sale.
Brand: Quizplus
Rating: 4.8 (43 reviews)

Question

Quizplus · Accepted Answer

If the default probability is low, it means that there is a low risk of the customer not paying back the credit. In such a case, extending credit for the sale can be a profitable decision if the profit margin on the sale is higher than the potential risk of default.

If the Default Probability Is Less Than the Profit Margin