NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
Which of the following industry characteristics most clearly indicates a cyclical industry?
A cyclical industry is one whose sales and profits move strongly with the business cycle, rising in expansions and falling in slowdowns. Autos, capital goods and real estate are examples. Industries with stable demand or necessity products are defensive, not cyclical.
- ADemand for its products stays stable irrespective of the economic cycle
- BIts sales and profits move strongly with the stage of the business cycleCorrect
- CIts products are daily necessities such as packaged staples
- DIts earnings are largely regulated and guaranteed by the government
Explanation
Cyclical industries, such as automobiles, capital goods and real estate, see sales and earnings rise sharply in expansions and fall in downturns. Stable demand and necessity products describe defensive industries.
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