CFA Level I · CFA Level I Exam · Company Analysis: Past, Present, and Future
Firm X competes in an industry where the top four firms hold 80% of sales. Firm X has a market share of 30% and its competitors' shares are 25%, 15% and 10%. The remaining 20% is split among many small firms. The Herfindahl-Hirschman Index calculated using only the four largest firms' shares (in percentage points) is closest to:
The four-firm HHI is closest to 1,850. Squaring each share in percentage points gives 900, 625, 225 and 100, which sum to 1,850. This indicates a moderately concentrated industry, with the small firms' contribution ignored.
- A1,600
- B1,850Correct
- C2,000
Explanation
HHI = 30² + 25² + 15² + 10² = 900 + 625 + 225 + 100 = 1,850. A distractor of 1,600 is 80², the sum treated as one share, and 2,000 adds guessed small-firm contributions.
Did you get it right without looking?
One question tells you little. A timed set on Company Analysis: Past, Present, and Future shows your real accuracy, how long you take and where you lose marks.
More Company Analysis: Past, Present, and Future questions
- An analyst is forecasting a retailer's revenue using a bottom-up approach. The analyst is most likely to project revenue as:
- When forecasting a company's future capital expenditures, an analyst should most likely consider:
- An analyst is forecasting revenue for a retailer with a stable store base. Which approach to forecasting revenue growth is most appropriate …
- When forecasting a company's future results, an analyst who first reviews the firm's historical growth, margins and returns on capital is mo…
- A firm pursues a differentiation strategy by offering a premium product. Which development would most likely undermine the sustainability of…
- An analyst begins a company analysis by examining the firm's revenue sources, its customer segments, and how it creates and captures value. …