- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 40. Introduction to Industry and Company Analysis
- Subject 2. Approaches to Identifying Similar Companies
CFA Practice Question
Which of the following industries is (are) most likely to be regarded as defensive?
II. Computer software industry
III. Food, cigarette, and beer companies
IV. Government contractors
I. Electric and gas utilities
II. Computer software industry
III. Food, cigarette, and beer companies
IV. Government contractors
Correct Answer: I, III and IV
User Contributed Comments 5
| User | Comment |
|---|---|
| jmcarr02 | government contractors can sometimes be counter-cyclical |
| AusPhD | Good point, thanks to fiscal stimulation |
| ascruggs92 | while I is typically true, utilities have literally been crushed over the past year or so |
| Inaganti6 | this all textbook gibberish. In india you spend $1.3 billion on a 2300 MegaWatt only to find out the natural gas for the turbines aren't available.... Meanwhile you're getting screwed by the interest on your part debt funded venture and the debt to equity ratio skyrockets and cash flows get hammered.... What defensive utility ! But I get the point shut up and tell the CFAI what it wants to head. |
| lancelot96 | The point is that these industries basically have rather inelastic demands, since no matter what there will still be many customers that demand these goods. |