Equity Investments - Equity Investments Section 2
56. Which of the following is most likely a characteristic of embryonic stage of an industry?
- Option : C
- Explanation : An embryonic industry is one that is just beginning to develop and is characterized by slow growth, high prices, and volumes not yet sufficient to achieve meaningful economies of scale, developing distribution channels, and low brand loyalty as there is low customer awareness of the industry’s product.
57. According to the industry life-cycle model, the growth phase is most likely characterized by:
- Option : B
- Explanation : A growth industry is characterized by rapidly increasing demand, falling prices, improving profitability, and relatively low competition among companies operating in the industry. Prices fall in the growth stage because economies of scale are achieved and the distribution channels develop. Industry consolidation is a feature of the maturity phase while intense competition characterizes the shakeout stage.
58. Which of the following industries can most likely be classified as cyclical?
- Option : C
- Explanation : Of the three industries listed the revenue/profits of the auto industry are most likely to rise/fall with overall economy.
59. Which of the following life-cycle phases is most likely categorized by intense competition?
