Equity Investments - Equity Investments Section 2
- Option : C
- Explanation : GICS and ICB use a four-tier structure while RGS uses a three-tier structure. B is incorrect because RGS classifies based on the products and services a company produces.
- Option : A
- Explanation : This classification actually makes it relatively easy to identify securities which are correlated. Options B and C represent limitations.
- A
Commercial classification system is reviewed more frequently as compared to government classification system.
- B
Government classification system generally distinguishes between large and small businesses while commercial system does not.
- C
A limitation of both the systems is that a company’s narrowest classification unit cannot be assumed to be its peer group.
- Option : B
- Explanation : Government classification system does no distinguish between large and small businesses, for-profit and non-profit, or private and public companies.
- Option : B
- Explanation : During recession, non-cyclical companies tend to outperform cyclical companies. Consumers are more likely to defer purchases of products of cyclical companies than of defensive companies.
40. Modern classification schemes are commonly based on grouping companies by:
- Option : A
- Explanation : Modern classification schemes are commonly based on grouping companies by similar products and/or services.
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