NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
An analyst studies an industry whose sales fall sharply in recessions but rebound strongly in expansions, such as passenger cars and capital goods. How is this industry best classified relative to the business cycle?
The industry is cyclical. Its sales and profits rise strongly during economic expansions and fall sharply during recessions, as with automobiles and capital goods. Defensive industries, by contrast, have steady demand regardless of the economic phase.
- ADefensive industry
- BCyclical industryCorrect
- CCounter-cyclical industry in all phases
- DStagnant industry with no cycle link
Explanation
Cyclical industries move with the economy, with amplified swings in revenue and profit. Defensive industries such as FMCG staples and utilities show stable demand through the cycle, so they do not match this pattern.
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