- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 6. Industry and Competitive Analysis
- Subject 2. Industry Classification
CFA Practice Question
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
Correct Answer: C
The Industry Classification Benchmark (ICB) categorizes individual companies into subsectors based primarily on their source of revenue (or the majority of revenue).
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 |