CCM Data Analysis & Decision Making 2

Question 1

A credit manager notices that a customer's Days Sales Outstanding (DSO) has increased from 35 to 62 days over six months. What is the most appropriate initial action?

Accepted Answer

Investigate whether the increase reflects an industry-wide trend or is customer-specific

Answer

Benchmarking the DSO change against industry peers determines whether the risk is systemic or isolated before taking action.

Question 2

Which statistical measure best describes the spread of credit scores across a customer portfolio?

Accepted Answer

Standard deviation

Answer

Standard deviation quantifies how widely individual credit scores deviate from the portfolio average.

Question 3

A regression analysis of payment behavior shows an R² of 0.85. What does this indicate?

Accepted Answer

85% of payment behavior variance is explained by the model's independent variables

Answer

R² (coefficient of determination) measures the proportion of variance in the dependent variable explained by the independent variables.

Question 4

When building a credit scorecard, which technique is used to assign weights to predictor variables based on their predictive power?

Accepted Answer

Weight of Evidence (WoE) analysis

Answer

Weight of Evidence quantifies the predictive power of each variable bin and is the foundation for scorecard development.

Question 5

A credit analyst is evaluating two suppliers. Supplier A has a Gini coefficient of 0.72 and Supplier B has 0.45. Which supplier's payment model discriminates better between good and bad payers?

Accepted Answer

Supplier A, because a higher Gini coefficient indicates better model discrimination

Answer

A higher Gini coefficient (closer to 1) indicates superior discriminatory power in separating good from bad credit risks.

(CCM) Certified Credit Manager Practice Test

(CCM) Certified Credit Manager Practice Test

CCM Data Analysis & Decision Making 2