NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
Which of the following is an example of a cyclical industry as classified in industry analysis?
Automobile manufacturing is a cyclical industry. Vehicles are expensive, deferrable purchases, so demand and profits rise sharply in booms and fall in downturns, whereas staple foods, chronic-disease medicines and electricity distribution have stable demand and are defensive.
- APackaged staple foods
- BPharmaceuticals generics for chronic disease
- CAutomobile manufacturingCorrect
- DElectricity distribution
Explanation
Cyclical industries see sales and profits move strongly with the economic cycle; automobiles are big-ticket, deferrable purchases. Staples, chronic-disease drugs and electricity are defensive since demand stays steady in downturns.
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