CFA Practice Question

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CFA Practice Question

Which of the following industries is (are) most likely to be regarded as defensive?

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.
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