Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 2 of 7
Which system categorizes companies on the basis of the source from which they derive the majority of their revenue?
B. RGS
C. ICB
A. GICS
B. RGS
C. ICB
User Contributed Comments 7
| User | Comment |
|---|---|
| dipu617 | p.214, Ex.3.1 says its GICS. So, the answer should be A. I might be wrong. Anybody with an explanation?! |
| michlam14 | in the notes here it says ICB categorizes companies into subsectors based primarily on a company's source of revenue. I looked around on this one, I think for A, the classification is on the basis of a company's primary activity, whereas ICB's basis is where they derive their revenue. There's a slight difference here but i am not sure if I fully understand either. Can someone else explain? |
| endurance | The GICS classification system classifies companies on the basis of a company's primary business activity, measured primarily by revenue. So basically A and C is correct |
| 2014 | Both GICS and ICB are similar in methods by which constituents are selected and number of tiers. In EOC question in institute books, GICS is answer for a similar question i hope it helps |
| jonan203 | wow, looks like i need to defer to the books for this section. |
| To-be-CFA | - Global Industry Classification Systems (GICS) - Industry taxonomy for the global community, used by S&P and MSCI. Categorizes on the basis of products/services. - Russell Global Sector - Three-tier structure to classify companies on products/services offered. - Industry Classification Benchmark (ICB) - Categorizes on the basis of sources of revenue. - International Standard Industrial Classification of All Economic Activities (ISIC) - Used by UN. Categorizes on basis of economic activity of entity. - Statistical Classification of Economic Activities in European Community - Similar to ISIC, but for Europe. - North American Industry Classification System (NAICS) - Jointly developed by the US, Canada and Mexico. - Peer Group Analysis - Takes into account demand environment, cost structure, access to financial capital and primary source of revenue. |
| Bududeen | nice but GIC is based on business activity |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
describe current industry classification systems, and identify how a company should be classified, given a description of its activities and the classification system;
explain how a company's industry classification can be used to identify a potential "peer group" for equity valuation;
CFA® 2024 Level I Curriculum, Volume 4, Module 40.