Equity Investments - Equity Investments Section 2

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41. Earnings of which of the following companies is most dependent on the stage of the business cycle?

  • Option : C
  • Explanation : The performance of companies with cyclical demand for their products is highly variable and depends on economic conditions.
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42. Which of the following is most likely a limitation of classifying companies based on business cycle sensitivity?

  • Option : B
  • Explanation : Different regions of the world might be at different stages of the business cycle.
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43. A peer group is constructed through a process:

  • Option : B
  • Explanation : The process consists of initially starting with commercial classification systems and then filtering it to the companies operating in the chosen industry.
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44. Which of the following statement about constructing a peer group is least accurate?

  • Option : A
  • Explanation : Constructing a peer group is a subjective process.
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45. Analyst 1: In industry analysis, we classify industries by life-cycle stage and identify whether it is embryonic, growth, shakeout, mature, or declining.
Analyst 2: In industry analysis, we consider external factors that affect industries, which include demographic, macroeconomic, governmental, social, and technological influences.
Which analyst’s statement is most likely correct?

  • Option : C
  • Explanation : Both statements are correct.
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