What is a Credit Simulation?

The basic idea of the credit scoring method is that the financial indicators reflect the credit status of the enterprise. Through analysis and simulation of the main financial indicators of the enterprise, the possibility of bankruptcy of the enterprise can be predicted, thereby predicting the credit risk of the enterprise. More famous is Altman's Z-score model. Among them, Z1 is mainly applicable to listed companies, Z2 is applicable to non-listed companies, and Z3 is applicable to non-manufacturing enterprises.

Credit scoring

Right!

The basic idea of the credit scoring method is that the financial indicators reflect the credit status of the enterprise. Through the analysis and simulation of the main financial indicators of the enterprise, the possibility of the bankruptcy of the enterprise can be predicted, thereby predicting the

Z1 = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 0.999X5

Where X1 = (current assets-current liabilities) /

Other models are neural network models. Tsinghua University in China used this method to evaluate China's listed companies. Lianhe Credit Rating Co., Ltd. also announced the model and evaluation results of quantitative credit ratings of listed companies in China (see Section 5 of this chapter). Credit scoring is a more objective method, and many banks in China appreciate this method without personal subjective opinions. However, due to the authenticity of China's financial security information and the standardization of financial reports, it is easy to produce deviations in practice. In addition, for the credit scoring method, China has not yet carried out a more scientific test, and the applicability of relevant parameters is not completely certain.