Chapter 13 Flashcards
(42 cards)
What is the primary reason for categorising equities by industry?
Equity analysts often specialise in an industry, making it practical to categorise shares by industry.
This allows analysts to focus on the relative merits of companies within the same industrial group.
Name two factors that affect companies within the same industry.
- Resources
- Markets
- Structure
True or False: Companies in the same industry tend to have share price movements that are correlated with each other.
True
This correlation is due to similar operating environments affecting companies in the same sector.
What is the FTSE industry classification system used for?
It classifies companies into ten industry groups, further divided into supersectors, sectors, and subsectors.
Which industry group is characterized by being large multinationals and commodity price dependence?
Oil and gas
Companies in this group are involved in the extraction and supply of oil and gas products.
List two key characteristics of the Basic Materials industry group.
- Includes the chemical and mining industries
- Produces intermediate goods
What distinguishes industrial companies from other sectors?
They are involved in the supply and production of capital goods, such as machinery and aircraft.
Fill in the blank: The performance of general industrials is very dependent on the level of _______.
[investment spending]
What is a distinctive feature of consumer goods companies?
They manufacture both consumer durables and non-durables.
How do consumer goods companies’ profits typically compare to those of general industrials?
Consumer goods companies generally experience less severe impact from economic cycles.
What kind of companies are included in the healthcare industry group?
- Healthcare providers
- Medical equipment and supplies
- Pharmaceuticals
Which group includes companies like airlines, casinos, and hotels?
Consumer Services
Name a key characteristic of the telecommunications industry.
Providers of fixed line and mobile telephone services.
What do utility companies supply?
Continuously demanded services, such as electricity, water, and gas distribution.
True or False: Utility companies are usually subject to tight government regulation.
True
This regulation is intended to prevent abuse of their monopoly position.
What is a distinctive feature of financial group companies?
They tend to be capital intensive.
Name two types of companies included in the financial services industry.
- Banks
- Insurance companies
Fill in the blank: Technology companies are involved in the new industries of _______ and _______.
[information technology hardware], [software]
What is the significance of brand names in the consumer goods sector?
A strong brand name allows for higher profit margins and leads to large advertising budgets.
What is a characteristic of companies in the healthcare sector?
They cover healthcare providers, medical equipment, and pharmaceuticals.
List the different classifications under the FTSE industry classification system.
- Industry
- Super-sector
- Sector
What are the two main types of consumer goods?
- Consumer durables
- Consumer non-durables
What is a common problem with industry groupings?
There are difficulties in ensuring that groupings are appropriate.
What are the ten industry groups in the FTSE industry classification system?
- Financials
- Technology
- Basic Materials
- Utilities
- Consumer Goods
- Industrials
- Consumer Services
- Health Care
- Oil & Gas
- Telecommunications
The FTSE system classifies companies into ten industry groups which are further divided into supersectors, sectors, and sub-sectors.
