Reading 37 Introduction to Industry and Company Analysis
1
Which of the following is least likely to involve industry analysis?
A Sector rotation strategy
B Top-down fundamental investing
C Tactical ast allocation strategy
SOLUTIONS:
1 C is correct. Tactical ast allocation involves timing investments in ast class and does not make u of industry analysis.
2
A ctor rotation strategy involves investing in a ctor by:
A making regular investments in it.
B investing in a pre-lected group of ctors on a rotating basis.
C timing investment to take advantage of business-cycle conditions. SOLUTIONS:
2 C is correct. A ctor rotation strategy is conducted by investors wishing to time investment in industries through an analysis of fundamentals and/or business-cycle conditions.
3
Which of the following information about a company would most likely depend on an industry analysis? The company’s:
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A treatment of long-lived asts on its financial statements.
B competitive environment.
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C trends in corporate expens.
SOLUTIONS:
3 B is correct. Determination of a company’s competitive environment depends on understanding its
industry.
4
In which ctor would a manufacturer of personal care products be classified?
A Health care
B Consumer staples
C Consumer discretionary
SOLUTIONS:
4 B is correct. Personal care products are classified as consumer staples in the “Description of Reprentative Sectors.”
5
An automobile manufacturer is most likely classified in which of the following industry ctors?
A Consumer staples
B Industrial durables
C Consumer discretionary
SOLUTIONS:
5 C is correct. Automobile manufacturers are classified as consumer discretionary. Consumer discretionary companies derive a majority of revenue from the sale of consumer-related products for which demand tends to exhibit a high degree of economic nsitivity—that is, high demand during periods of economic expansion and low demand during periods of contraction.释迦果的热量
6
Which of the following statements about commercial and government industry
classification systems is most accurate?
A Many commercial classification systems include private for-profit companies.
B Both commercial and government classification systems exclude not-for profit companies.
C Commercial classification systems are generally updated more frequently than government classification systems.
SOLUTIONS:
6 C is correct. Commercial systems are generally updated more frequently than government systems and include only publicly traded for-profit companies.
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From Equity Reading37-P313
Classification systems are developed and ud by both commercial entities and various governmental agencies. Most government and commercial classification systems are reviewed and, if necessary, updated from time to time. Generally, commercial classification systems are adjusted more frequently than government classification systems, which may be updated only every five years or so. We focus on the commercial systems becau they are more commonly ud in the investment industry.
Major index providers, including Standard & Poor’s, MSCI, Rusll Investments, Dow Jones, and FT
SE Rusll, classify companies in their equity indexes into industry groupings.
7
Which of the following is not a limitation of the cyclical/non-cyclical descriptive approach to classifying companies?
经理助理工作内容A A cyclical company may have a growth component in it.
B Business-cycle nsitivity is a discrete phenomenon rather than a continuous spectrum.
C A global company can experience economic expansion in one part of the world while experiencing recession in another part.
SOLUTIONS:
7 B is correct. Business-cycle nsitivity falls on a continuum and is not a discrete “either/or” phenomenon.
钩藤的副作用8
A cyclical company is most likely to:
A have low operating leverage.
B ll relatively inexpensive products.
C experience wider-than-average fluctuations in demand.
SOLUTIONS:
8 C is correct. Cyclical companies are nsitive to the business cycle, with low product demand during periods of economic contraction and high product demand during periods of economic expansion. They, therefore, experience wider-than-average fluctuations in product demand.
9
A company that is nsitive to the business cycle would most likely:
A not have growth opportunities.
B experience below-average fluctuation in demand.
C ll products that customers can purcha at a later date if necessary. SOLUTIONS:
9 C is correct. Customers’ flexibility as to when they purcha a product mak es the product more nsitive to the business cycle.
10
Which of the following factors would most likely be a limitation of applying business-cycle analysis to global industry analysis?
A Some industries are relatively innsitive to the business cycle.
B Correlations of curity returns between different world markets are relatively low.
C One region or country of the world may experience recession while another region experiences expansion.
SOLUTIONS:
10 C is correct. Varying conditions of recession or expansion around the world would affect the comparisons of companies with sales in different regions of the world.帅泰
11
Which of the following statements about peer groups is most accurate?
A Constructing a peer group for a company follows a standardized process.
B Commercial industry classification systems often provide a starting point for constructing a peer group.
C A peer group is generally compod of all the companies in the most narrowly defined category ud by the commercial industry classification system. SOLUTIONS:
11 B is correct. Constructing a peer group is a subjective process, and a logical starting point is to begin with a commercially available classification system.
表格里换行This system will identify a group of companies that may have properties comparable to the business activity of interest.
12
With regard to forming a company’s peer group, which of the following statements is not correct?
A Comments from the management of the company about competitors are generally not ud when lecting the peer group.
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B The higher the proportion of revenue and operating profit of the peer company derived from business activities similar to tho of the subject company, the more meaningful the comparison.
