Deck 14: Industry Analysis

Question 1

Standard and Poor's new Global Industry Classification Standard includes approximately:

A)10,000 companies.
B)25,000 companies.
C)60,000 companies.
D)100,000 companies.

Answer 1

B

Question 2

Which life cycle stage generally sees industries improving their products,lowering prices,and starting to attract considerable investment funds?

A)Pioneering stage
B)Expansion stage
C)Stabilization stage
D)Declining stage

Answer 2

B

Question 3

The basic competitive forces 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.

Answer 3

B

Question 4

Which of the following is not one of the stages of the industry life cycle?

A)Expansion
B)Destabilization
C)Declining
D)Pioneering

Question 5

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.

Question 6

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

Question 7

The most important point of Michael Porter's analysis is that industry profitability is a function of:

A)economic conditions.
B)the level of interest rates.
C)the industry structure.
D)the industry beta.

Question 8

At what stage of a company's life cycle does an investor typically stand to earn the highest return?

A)Pioneering stage
B)Expansion stage
C)Stabilization stage
D)Declining stage

Question 9

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 accurately into a specific phase.
C)The general framework may not apply to some industries.
D)The approach does not explicitly lead to a stock price determination.

Question 10

Based on past evidence,if an industry has the number one ranking on price performance,which of the following statements is most accurate?The investor should:

A)not expect that same industry to be ranked number one again next year.
B)expect that industry to maintain its top ranking for five years or more.
C)expect that industry to do well over the next 10 to 20 years.
D)expect that industry to drop out of the top ten rankings within five years.

Question 11

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.

Question 12

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.

Question 13

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

Question 14

The food industry would be considered a:

A)growth industry.
B)defensive industry.
C)cyclical industry.
D)countercyclical industry.

Question 15

The U.S.is moving from an:

A)agricultural society to an industrial society.
B)agricultural society to an information society.
C)industrial society to an information society.
D)information society to an industrial society.

Question 16

The second step in the fundamental analysis of common stock is:

A)company analysis.
B)economy analysis.
C)industry analysis.
D)business cycle analysis.

Question 17

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.

Question 18

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

Question 19

When conducting industry analysis,investors should consider the historical data for all of the following except:

A)sales growth.
B)earnings growth.
C)interest rates.
D)price performance.

Question 20

Standard & Poor's new Global Industry Classification Standard divides firms into:

A)10 economic sectors.
B)24 economic sectors.
C)68 economic sectors.
D)154 economic sectors.

Question 21

Which industry has been devastated by changes in EPA regulations since 2010?

A)Telecom
B)Coal
C)Chemicals
D)Oil

Question 22

Which decade is commonly referred to as the "lost decade" due to the poor performance of U.S.stocks?

A)The 1970s
B)The 1980s
C)The 1990s
D)The 2000s

Question 23

Which of the following types of industries would be expected to perform the worst during an economic contraction?

A)Growth
B)Defensive
C)Cyclical
D)Value

Question 24

Which of the following industry categories is said to be "bought to be sold?"

A)Cyclical
B)Defensive
C)Growth
D)Countercyclical

Question 25

The Value Line Investment Survey covers approximately 60 industries.

Question 26

The food industry is a good example of a countercyclical industry.

Question 27

Which of the following sectors has the highest beta?

A)Food
B)Utilities
C)Automobiles
D)Drugs,soap,perfumes and tobacco

Question 28

In the expansion stage,products become more standardized.

Question 29

Since performance is not always consistent,an industry's track record should not be of much concern to investors.

Question 30

It is a relatively simple matter of finding industries that will perform well in the short run.

Question 31

The NAICS puts companies into industries based on the activity in which they are primarily engaged.

Question 32

A company's founders,friends,and family are typically the main investors in the pioneering stage of any company.

Question 33

Growth industries often perform well during economic setbacks.

Question 34

One limitation of the life cycle approach is that all companies fall into a specific category.

Question 35

The expansion stage of the industry life cycle is probably of most interest to investors because growth is rapid and risk is tolerable.

Question 36

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

Question 37

Which of the following sectors was most adversely affected by the accounting changes requiring the expensing of stock options?

A)Manufacturing
B)Technology
C)Energy
D)Utilities

Question 38

Which of the following industries would you have most liked to have been invested in over the past 25 years?

A)Steelworks
B)Consumer durables
C)Mining and minerals
D)Food

Question 39

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

Question 40

Countercyclical and defensive are different terms for the same industry
type.

Question 41

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.

Question 42

Would it be useful to the analyst to compare industry data to basic economic data such as the GDP or consumer spending?

Question 43

Mature industries typically have much higher P/E ratios than growth industries,which are riskier.

Question 44

When should companies in cyclical industries be bought?

Question 45

What industries do you think will be the growth industries of the next
decade?

Question 46

How can historical performance help the analyst assess the future prospects for an industry?

Question 47

What are the five competitive factors identified in the Michael Porter model?

Question 48

The North American Industry Classification System (NAICS)was developed using a production-oriented approach,resulting in companies being classified into industries based on the activity in which they are primarily engaged.

Question 49

Give several examples of government effects on industries.

Question 50

Differentiate between defensive industries and countercyclical industries.

Question 51

In which stage of the industry life cycle is it easiest for the analyst to assess industry prospects and identify the leading companies?

Question 52

What are four basic aspects of qualitative assessment of industries?