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NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance

Which of the following best reflects the analyst's use of the Porter's Five Forces framework when assessing a company's business?

Porter's Five Forces examines industry attractiveness by assessing competitive rivalry, the threat of new entrants, the threat of substitutes, and the bargaining power of buyers and suppliers. It is not a valuation, technical trend or market capitalisation ranking tool.

  1. AIt evaluates industry attractiveness through rivalry, entry threats, substitutes, and the bargaining power of buyers and suppliersCorrect
  2. BIt computes the intrinsic value using discounted dividends
  3. CIt measures the technical trend using moving averages
  4. DIt ranks companies by their market capitalisation

Explanation

Porter's Five Forces assesses competitive intensity and profit potential of an industry using five forces: rivalry, threat of new entrants, threat of substitutes, buyer power and supplier power. The other options describe valuation, technical analysis and size ranking.

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