A financial compliance department classifies portfolio companies into three regulatory mon… — GMAT

A financial compliance department classifies portfolio companies into three regulatory monitoring tiers—Tier Alpha, Tier Beta, and Tier Gamma—based on three financial criteria:

1. Debt-to-Equity ( $D/E$ ) ratio $< 1.5$
2. Net Profit Margin $> 12\%$
3. Audit Rating of 'Unqualified'

The classification rules are defined as follows:
- Tier Alpha: The company satisfies at least two of the three criteria.
- Tier Gamma: The company satisfies fewer than two of the three criteria AND meets at least one of the following risk triggers: an Audit Rating of 'Adverse' OR a $D/E$ ratio $> 2.5$ .
- Tier Beta: Any company that does not meet the criteria for either Tier Alpha or Tier Gamma.

The relevant metrics for four portfolio companies are summarized in the table below:

Company	Debt-to-Equity ( $D/E$ )	Net Profit Margin	Audit Rating
Company W	$1.2$	$15\%$	Adverse
Company X	$2.8$	$10\%$	Unqualified
Company Y	$1.8$	$14\%$	Qualified
Company Z	$1.4$	$11\%$	Adverse

Based on the classification rules, which of the following correctly pairs the regulatory monitoring tiers for Company W and Company Y, respectively?

Company W: Tier Alpha; Company Y: Tier BetaCevap
B
Company W: Tier Alpha; Company Y: Tier Gamma
C
Company W: Tier Gamma; Company Y: Tier Beta
D
Company W: Tier Beta; Company Y: Tier Gamma
E
Company W: Tier Beta; Company Y: Tier Beta

Cevap

Company W is classified under Tier Alpha and Company Y is classified under Tier Beta.

To classify Company W, we evaluate the three criteria:

D/E = 1.2 < 1.5

(satisfied), Margin

= 15\% > 12\%

(satisfied), and Audit Rating = 'Adverse' (not satisfied). Because Company W satisfies exactly 2 criteria, it meets the Tier Alpha definition of satisfying at least two criteria.

To classify Company Y, we evaluate its criteria:

D/E = 1.8 < 1.5

(not satisfied), Margin

= 14\% > 12\%

(satisfied), and Audit Rating = 'Qualified' (not satisfied). Company Y satisfies 1 criterion (fewer than 2), so it is not Tier Alpha. Next, we test the Tier Gamma conditions: it has fewer than 2 criteria satisfied, but its Audit Rating is not 'Adverse' and its

D/E = 1.8 \le 2.5

. Since neither risk trigger is present, it does not meet the Tier Gamma criteria. By elimination, Company Y must be in Tier Beta.

Adım Adım Çözüm

Evaluate the 3 core criteria for Company W

Criterion 1 (

D/E < 1.5

1.2 < 1.5

(True). Criterion 2 (Margin

> 12\%

15\% > 12\%

(True). Criterion 3 (Audit 'Unqualified'): 'Adverse' (False). Total satisfied = 2.

Determining how many criteria are satisfied dictates tier eligibility.

Classify Company W based on rules

Company W satisfies 2 of 3 criteria

\ge 2

, so Company W is Tier Alpha.

The Tier Alpha rule requires satisfying at least two of the three criteria.

Evaluate the 3 core criteria for Company Y

Criterion 1 (

D/E < 1.5

1.8 < 1.5

(False). Criterion 2 (Margin

> 12\%

14\% > 12\%

(True). Criterion 3 (Audit 'Unqualified'): 'Qualified' (False). Total satisfied = 1.

Fewer than 2 conditions satisfied rules out Tier Alpha.

Check Tier Gamma risk triggers for Company Y

Risk Trigger 1 (Audit 'Adverse'): 'Qualified' (False). Risk Trigger 2 (

D/E > 2.5

1.8 > 2.5

(False). Neither risk trigger is met.

Tier Gamma requires satisfying fewer than two conditions AND meeting at least one risk trigger.

Classify Company Y based on rules

Company Y is neither Tier Alpha nor Tier Gamma, so it falls into Tier Beta.

Tier Beta contains all remaining companies.

Anahtar Kavram

Multi-attribute categorical classification using nested logical conjunctions (AND/OR) and threshold rules.

Tahmini Süre:2m 30s

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