Industry and Competitive Analysis practice questions

What to know

Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.

How to practice

Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.

Review signal

Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.

Equity Investments

Industry and Competitive Analysis

In Porter's Five Forces, high barriers to entry most directly reduce the:

Equity Investments

Industry and Competitive Analysis

An industry whose revenues are relatively stable across the business cycle is best described as:

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Industry and Competitive Analysis

A mature industry with excess capacity, slow demand growth, and high fixed costs is most likely to experience:

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Industry and Competitive Analysis

A new environmental regulation that raises compliance costs for chemical producers is most directly a factor in the:

Equity Investments

Industry and Competitive Analysis

An industry is growing rapidly, but entry barriers are low, products are undifferentiated, and buyers can easily switch suppliers. The most accurate conclusion is that:

Equity Investments

Industry and Competitive Analysis

A company differentiates its product through a strong brand and high switching costs. The competitive effect is most likely:

Equity Investments

Industry and Competitive Analysis

Industry analysis is least likely used by an equity analyst to:

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Industry and Competitive Analysis

An analyst forms peer groups by clustering companies whose historical equity returns have been highly correlated with one another. This industry classification approach is best described as grouping by:

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Industry and Competitive Analysis

A company earns 40% of its revenue from industrial machinery, 35% from consumer appliances, and 25% from financial services. Under a major commercial industry classification system, the company will most likely be:

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Industry and Competitive Analysis

Producers in an industry purchase a critical component that is available from only two suppliers worldwide. The component has no close substitutes, it represents a large share of the producers' total costs, and switching to the other supplier requires a lengthy and costly requalification process. In a five-forces analysis of the producers' industry, these conditions most likely indicate:

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Industry and Competitive Analysis

An industry's growth rate, once rapid, is now slowing sharply. Competitors increasingly compete on price, industry-wide overcapacity is emerging, and weaker firms are being acquired or are exiting. In the industry life-cycle model, this industry is most likely in the:

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Industry and Competitive Analysis

An analyst evaluating the long-term demand outlook for hearing-aid manufacturers notes that the median age of the population in the company's key markets is rising steadily. Within a PESTLE analysis, this influence is best classified as:

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Industry and Competitive Analysis

During the growth stage of the industry life cycle, rivalry among existing competitors is often relatively low. The most likely reason is that:

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Industry and Competitive Analysis

To assess demand trends in an industry, an analyst conducts original interviews with the industry's distributors and end customers rather than relying on published trade-association reports. The analyst's information-gathering approach is best described as:

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Industry and Competitive Analysis

A building-materials company has the lowest per-unit production costs in its industry, sells a largely undifferentiated product at the prevailing market price, and consistently earns operating margins above the industry average. The company's competitive strategy is best described as:

Equity Investments

Industry and Competitive Analysis

A telecommunications-equipment industry long classified as mature experiences a major technological innovation that creates substantial new sources of demand. An analyst concludes that because the industry is mature, its next stage must be decline. The analyst's conclusion is best characterized as: