Investments in cyclical firms are less risky than investments in firms in non-cyclical industries.

Question

Quizplus · Accepted Answer

Investments in cyclical firms are generally considered to be more risky than investments in firms in non-cyclical industries. This is because cyclical firms are highly dependent on the economic cycles and fluctuations, and their profitability tends to rise and fall with changes in the business cycle. Non-cyclical firms, on the other hand, are less affected by economic fluctuations as their products or services are considered essential, regardless of the economic climate. Therefore, investing in non-cyclical firms is generally considered to be less risky than investing in cyclical firms.

Investments in Cyclical Firms Are Less Risky Than Investments in Firms