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Every time a business grants financial credit to an

Expert replies
by BTGmoderatorDC » Thu Aug 09, 2018 8:59 pm

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Difficulty—

Every time a business grants financial credit to an individual, the business assumes risk. In order to evaluate the risk, a business must have correct information about that individual's financial history. It is true that credit bureaus, which compile such information from computerized records, have been accused of invading the consumer's right to privacy. If, however, only limited restrictions are placed on the availability of such information to businesses, those businesses will be able to reduce their overall exposure to risk by giving credit only to people with good credit ratings while at the same time extending larger amounts of credit to more people. This way credit bureaus can, in fact, prevent the foolhardy consumer from becoming seriously overextended.

In the passage above, the author assumes which of the following?

A] It is difficult to quantify the risk involved in any single decision to grant credit.
B] Without the service provided by credit bureaus, businesses would have no factual basis for making credit decisions.
C] The financial data that credit bureaus supply to businesses is generally accurate.
D] It is difficult to reduce the complexities of an individual's financial history to a computerized record.
E] Consumers, in general, tend to seek more credit than they can safely assume.

OA C

Source: Princeton Review
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Source: — Critical Reasoning |

by deloitte247 » Sun Aug 12, 2018 4:38 am
Option A - INCORRECT.
It is difficult to quantify the risk involved in any single decision to grant credit, that is why the help of the credit bureaus is needed to give out financial information about customer to business organization who needs it to decision making of the organization whether to give out such credit grant to customer or not. This step is mostly important to business who grant financial credits.

Option B - INCORRECT.
Presumably, Without the service provided by credit bureaus, businesses would have no factual basis for making credit decisions, rather they will be forced to dwell on the files provided by the customer which sometimes are false records and springs up doubt, thus, risky to make credit grant decisions from it.

Option C - CORRECT.
This option has given adequate information about the authors assumption. The financial data that credit bureaus supply to businesses is generally accurate. However, if businesses are given freedom to checkmate customers financial records from the credit bureaus it will reduce their overall expose to risk by giving credit only to people who have records of good credit rating also prevent business from high risk. Meanwhile, stopping foolhardy from over extending.

Option D - INCORRECT.
However, It is difficult to reduce the complexities of an individual's financial history to a computerized record, but most-times it can be accountable through bank statement.

Option E - INCORRECT.
Due to consumers know that business can't have access to their financial data, consumers tend to seek more credit than they can safely assume now putting the organization at risk when its time to pay back.
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