Which of the following statements is incorrect?

Multiple Choice

• While linear probability models divide firms into high or low bankruptcy risk classes, logit models and linear discriminant models produce a value for the expected probability of bankruptcy.

• The logit model overcomes a weakness of the linear probability model by restricting the estimated range of bankruptcy probabilities to lie between 0 and 1.

• All three credit scoring models use past data, such as financial ratios, as inputs to explain repayment experiences on old debt.

• All of the statements are correct.