Question 1

Carl forecasts that the economy will move into recession over the next twelve months. Which of the following sectors should he overweight in his portfolio?

Accepted Answer

A)  Chemicals 
B)  Financials 
C)  Consumer durables 
D)  Healthcare 
A)  Chemicals 
B)  Financials 
C)  Consumer durables 
D)  Healthcare

Question 2

Which of the following is not considered an interest-rate sensitive industry?

Accepted Answer

A)  Construction industry 
B)  Banking industry 
C)  Financial services industry 
D)  Tobacco industry 
A)  Construction industry 
B)  Banking industry 
C)  Financial services industry 
D)  Tobacco industry

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Which of the following industries/sectors has produced the best performance for investors in the long term?

Accepted Answer

A)  Utilities 
B)  Automobiles 
C)  Mining and minerals 
D)  Food 
A)  Utilities 
B)  Automobiles 
C)  Mining and minerals 
D)  Food

Question 5

The U.S. is moving from an:

Accepted Answer

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. 
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 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

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

Question 8

The Porter basic competitive forces include all of the following except:

Accepted Answer

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.

Question 9

Which of the following industries/sectors has the highest beta?

Accepted Answer

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

Question 10

Firms in an industry have a low profit margin and a very low price-to-book ratio. What industry life cycle is most consistent with these characteristics?

Accepted Answer

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

Question 11

Assume two firms are comparable in all other respects except for their industry. Which would be the preferred investment? The firm that operates in the industry:

Accepted Answer

A)  with more exit barriers. 
B)  with products that are more differentiated. 
C)  with a relatively few large customers. 
D)  with fewer barriers to entry. 
A)  with more exit barriers. 
B)  with products that are more differentiated. 
C)  with a relatively few large customers. 
D)  with fewer barriers to entry.

Question 12

Differentiate between defensive industries and countercyclical industries.

Accepted Answer

Defensive industries are least

Question 13

Profit margins are generally lower in industries characterized by:

Accepted Answer

A)  rapid growth in sales. 
B)  many barriers to entry. 
C)  many exit barriers. 
D)  substantial economies of scale 
A)  rapid growth in sales. 
B)  many barriers to entry. 
C)  many exit barriers. 
D)  substantial economies of scale

Question 14

Which of the following is a limitation of the life cycle approach to security analysis?

Accepted Answer

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.

Question 15

What are the five competitive forces identified in the Porter model?

Accepted Answer

The threat of new entrants, ba

Question 16

Growth industries often perform relatively well during economic setbacks.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

An analyst often looks for industries th

Question 18

S&P's Global Industry Classification Standard includes approximately:

Accepted Answer

A)  10,000 companies. 
B)  45,000 companies. 
C)  60,000 companies. 
D)  100,000 companies. 
A)  10,000 companies. 
B)  45,000 companies. 
C)  60,000 companies. 
D)  100,000 companies.

Question 19

When should companies in cyclical industries be bought?

Accepted Answer

An investor would like to buy cyclical s

Question 20

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

Accepted Answer

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

Exam 14: Sectorindustry Analysis

Carl forecasts that the economy will move into recession over the next twelve months. Which of the following sectors should he overweight in his portfolio?

Which of the following is not considered an interest-rate sensitive industry?

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

Which of the following industries/sectors has produced the best performance for investors in the long term?

The U.S. is moving from an:

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

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

The Porter basic competitive forces include all of the following except:

Which of the following industries/sectors has the highest beta?

Firms in an industry have a low profit margin and a very low price-to-book ratio. What industry life cycle is most consistent with these characteristics?

Assume two firms are comparable in all other respects except for their industry. Which would be the preferred investment? The firm that operates in the industry:

Differentiate between defensive industries and countercyclical industries.

Profit margins are generally lower in industries characterized by:

Which of the following is a limitation of the life cycle approach to security analysis?

What are the five competitive forces identified in the Porter model?

Growth industries often perform relatively well during economic setbacks.

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

S&P's Global Industry Classification Standard includes approximately:

When should companies in cyclical industries be bought?

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

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