Deck 14: Sector/ industry Analysis
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Question
Unlock Deck
Sign up to unlock the cards in this deck!
Unlock Deck
Unlock Deck
1/50
Play
Full screen (f)
Deck 14: Sector/ industry Analysis
1
When conducting industry analysis, investors should consider the historical record of all the following except:
A) sales growth.
B) earnings growth.
C) interest rates.
D) price performance.
A) sales growth.
B) earnings growth.
C) interest rates.
D) price performance.
C
2
A well-known and widely used system that classified industries for more than 60 years was the:
A) Commercial Industrial Classification system.
B) National Industrial Classification system.
C) Standard Industrial Classification system.
D) American Industrial Classification system.
A) Commercial Industrial Classification system.
B) National Industrial Classification system.
C) Standard Industrial Classification system.
D) American Industrial Classification system.
C
3
The basic competitive factors facing industries include all of the following except:
A) bargaining power of suppliers
B) threat of government regulation
C) rivalry between existing competitors
D) threat of substitute products
A) bargaining power of suppliers
B) threat of government regulation
C) rivalry between existing competitors
D) threat of substitute products
B
4
Which of the following is a limitation of the life cycle approach to security analysis?
A) It focuses on sales rather than stock prices.
B) It focuses on the past more than the present.
C) It does not consider the risk in the different cycles.
D) It does not consider quantitative factors.
A) It focuses on sales rather than stock prices.
B) It focuses on the past more than the present.
C) It does not consider the risk in the different cycles.
D) It does not consider quantitative factors.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
5
If an industry is ranked number one, based on price performance of the S&P Industry Stock Indexes, an investor
A) cannot necessarily expect that same industry to be ranked number one again next year.
B) can usually depend on an industry to maintain its top ranking for five years or more.
C) can expect that industry to do well over the next 10 to 20 years.
D) can expect that industry to drop out of the top ten within five years.
A) cannot necessarily expect that same industry to be ranked number one again next year.
B) can usually depend on an industry to maintain its top ranking for five years or more.
C) can expect that industry to do well over the next 10 to 20 years.
D) can expect that industry to drop out of the top ten within five years.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
6
The most important point of Michael Porter's analysis is that industry profitability is a function of
A) economy.
B) interest-rate level.
C) industry structure.
D) industry beta.
A) economy.
B) interest-rate level.
C) industry structure.
D) industry beta.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
7
Which of the following is not one of the stages of the industry life cycle?
A) expansion
B) destabilization
C) declining
D) pioneering
A) expansion
B) destabilization
C) declining
D) pioneering
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
8
Which of the following statements about the industry life cycle is incorrect?
A) Companies may stay in one phase for a significant period of time .
B) All industries can be classified very accurately into a specific phase.
C) The general framework may not apply to some industries.
D) This approach does not explicitly lead to a stock price determination.
A) Companies may stay in one phase for a significant period of time .
B) All industries can be classified very accurately into a specific phase.
C) The general framework may not apply to some industries.
D) This approach does not explicitly lead to a stock price determination.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
9
Industry analysis is important because:
A) companies can only do as well as their industry.
B) industries often have an inverse relationship to the market.
C) industries perform very differently over time.
D) companies in declining industries lose money.
A) companies can only do as well as their industry.
B) industries often have an inverse relationship to the market.
C) industries perform very differently over time.
D) companies in declining industries lose money.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
10
The food industry would be considered:
A) growth industry.
B) defensive industry.
C) cyclical industry.
D) countercyclical industry.
A) growth industry.
B) defensive industry.
C) cyclical industry.
D) countercyclical industry.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
11
An investor at what stage of a company's life cycle typically stands to earn the highest return?
A) pioneering stage.
B) expansion stage.
C) stabilization stage.
D) maturity stage.
A) pioneering stage.
B) expansion stage.
C) stabilization stage.
D) maturity stage.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
12
Standard & Poor's new Global Industry Classification system divides everything into _________economic sectors.
A) 10
B) 24
C) 68
D) 154
A) 10
B) 24
C) 68
D) 154
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
13
Which of the following is NOT among the qualitative factors that should be analyzed to assess an industry's future?
A) Historical performance
B) Competition
C) Growth rate of sales
D) Structural changes
A) Historical performance
B) Competition
C) Growth rate of sales
D) Structural changes
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
14
Which of the following has 10 economic sectors, 24 industry groupings, 64 industries and 139 sub-industries?
A) SIC
B) NAICS
C) GICS
D) Value Line Investment Survey
A) SIC
B) NAICS
C) GICS
D) Value Line Investment Survey
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
15
At what stage in the industry life cycle do financial policies become firmly established?
A) Pioneering stage
B) Expansion stage
C) Stabilization stage
D) Declining stage
A) Pioneering stage
B) Expansion stage
C) Stabilization stage
D) Declining stage
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
16
The U.S. is moving from an ---------- society to an ----------- society.
A) agricultural; industrial
B) agricultural; information
C) industrial; information
D) industrial; international
A) agricultural; industrial
B) agricultural; information
C) industrial; information
D) industrial; international
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
17
Standard and Poor's new Global Industry Classification System already includes _______ companies.
A) 10,000 +
B) 25,000+
C) 50,000 +
D) 75,000+
A) 10,000 +
B) 25,000+
C) 50,000 +
D) 75,000+
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
18
Regarding the qualitative aspects of industry analysis, the breakup of AT&T in 1984 would be considered a:
A) structural change.
B) government effect.
C) competitive effect.
D) cyclical effect.
A) structural change.
B) government effect.
C) competitive effect.
D) cyclical effect.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
19
Which life cycle stage generally sees industries improving their products, lowering prices, and start to attract considerable investment funds?
A) pioneering stage
B) expansion stage
C) stabilization stage
D) maturity stage
A) pioneering stage
B) expansion stage
C) stabilization stage
D) maturity stage
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
20
The second step in the fundamental analysis of common stock, after the economy, is:
A) company
B) economy
C) industry
D) business cycle
A) company
B) economy
C) industry
D) business cycle
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
21
The NAICS puts companies into industries based on the activity in which they are primarily engaged.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
22
Growth industries often perform well during economic setbacks.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
23
The expansion stage of the industry life cycle is probably of most interest to investors, in which growth is rapid and risk is tolerable.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
24
In the expansion stage, products become more standardized.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
25
Which of the following industry categories is said to be "bought to be sold?"
A) cyclical
B) defensive
C) growth
D) countercyclical
A) cyclical
B) defensive
C) growth
D) countercyclical
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
26
The Value Line Investment Survey covers approximately 60 industries.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
27
The food industry is a good example of a countercyclical industry.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
28
Which of the following sectors was adversely affected by the recent accounting changes requiring the expensing of stock options?
A) manufacturing
B) technology
C) energy
D) utilities
A) manufacturing
B) technology
C) energy
D) utilities
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
29
Countercyclical and defensive are different terms for the same industry
type.
type.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
30
Since performance is not always consistent, an industry's track record should not be of much concern to investors.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
31
The North American Industry Classification System (NAICS) was developed using a production-oriented approach, with the result companies are classified into industries based on the activity in which they are primarily engated.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
32
Which of the following types of industries is likely to be least affected in a recession?
A) Expansionary
B) Interest-rate sensitive
C) Defensive
D) Countercyclical
A) Expansionary
B) Interest-rate sensitive
C) Defensive
D) Countercyclical
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
33
A company's founders, friends and family are typically the main investors in the pioneering stage of any company.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
34
Which of the following is not considered an interest-rate sensitive industry?
A) building industry
B) banking industry
C) financial services industry
D) tobacco industry
A) building industry
B) banking industry
C) financial services industry
D) tobacco industry
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
35
It is a relatively simple matter of finding industries that will perform well in the short run.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
36
Standard & Poor's industry analysis has been shown to be less accurate in predicting expected performance than the Value Line Investment Survey.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
37
Three industry analysis approaches are:
A) business cycle analysis, qualitative analysis of important factors affecting industries, sector rotation.
B) business cycle analysis, quantitative analysis of important factors affecting industries, market timing.
C) business cycle analysis, technical analysis of important factors affecting industries, fundamental sector analysis.
D) business cycle analysis, fundamental analysis of important factors affecting industries, technical sector analysis.
A) business cycle analysis, qualitative analysis of important factors affecting industries, sector rotation.
B) business cycle analysis, quantitative analysis of important factors affecting industries, market timing.
C) business cycle analysis, technical analysis of important factors affecting industries, fundamental sector analysis.
D) business cycle analysis, fundamental analysis of important factors affecting industries, technical sector analysis.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
38
One limitation of the life cycle approach is that all companies fall into a specific category.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
39
Mature industries typically have much higher P/E ratios than growth industries, which are riskier.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
40
The NAICS uses a five digit hierarchical coding system to classify all economic activity into 20 industry sectors, providing greater flexibility relative to SIC codes. A total of 15 of these sectors are devoted to services-producing sectors, compared to only 5 that are mainly goods-producing sectors. NAICS allows for identification of 1,170 industries. It includes 9 new service sectors and 250 new service industries.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
41
Would it be useful to the analyst to compare industry data to basic economic data such as the GDP or consumer spending?
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
42
What are four basic aspects of qualitative assessment of industries?
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
43
How can historical performance help the analyst assess the future prospects for an industry?
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
44
In which stage of the industry life cycle is it easiest for the analyst to assess industry prospects and identify the leading companies?
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
45
Portfolio diversification often focuses on cross-industry diversification to pick up correlation coefficients and risk-expected return characteristics that create the portfolio effect. Suggest a realignment of "industry" classifications to reflect fundamental relationships sought through the more casual traditional industries.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
46
When should companies in cyclical industries be bought?
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
47
What are the five competitive factors identified in the Michael Porter model?
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
48
What industries do you think will be the growth industries of the next
decade?
decade?
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
49
Differentiate between defensive industries and countercyclical industries.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck
50
Give several examples of government effects on industries.
Unlock Deck
Unlock for access to all 50 flashcards in this deck.
Unlock Deck
k this deck