CFA Level I · CFA Level I Exam · Industry and Competitive Analysis
Which sector is most likely to be classified as defensive, showing relatively low sensitivity of revenue to the business cycle?
Packaged food and household staples are most likely defensive. Consumers buy these necessities in good times and bad, so revenue varies little across the business cycle. Residential construction and autos involve large, deferrable purchases, so their demand swings widely with the economy.
- APackaged food and household staplesCorrect
- BResidential construction
- CAutomobile manufacturing
Explanation
Staples are purchased regardless of economic conditions, so revenue is steady. Housing and autos are big-ticket, deferrable purchases that fall sharply in downturns, making them cyclical.
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