CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

Which of the following statements is (are) true with respect to the impact that external factors may have on industries?

I. Technological change will benefit all firms operating within a particular industry.
II. Consistent statutory tax rates across all industries will ensure that all industries are faced with the same degree of tax burden.
III. Lifestyle changes will have a more profound impact on an industry over the long term than the short term.
IV. Trade liberalization will benefit all industries as it expands their respective target markets.
Correct Answer: III only

I is incorrect because only the firms that are quick to adopt the technological change will benefit.

II is incorrect because consistent statutory tax rates across all industries does not imply that all industries are faced with the same "effective" tax rates. For instance, simply changing the rules as to what items may or may not be included for taxation could change the effective tax rate faced by an industry.

IV is not always true. Trade liberalization will benefit some industries as it expands their respective target markets; however, for other industries, it makes things more difficult as new foreign competition is introduced.

User Contributed Comments 2

User Comment
msoussan I do not understand the II). someone can explain, please?
johntan1979 Keyword: all
You need to log in first to add your comment.