Los 44.b

Question 1

What are types of industry classifications?

Answer 1

Each following classification has a list of the hierachy
* GICS: sector, industry groups, industries, subindustries
* ICB: industries, supersectors, sectors, subsectors
* TRBC: economic sectors, business sectors, industry groups, industries, activities

Question 2

How do providers classify firms?

Answer 2

A firm with one business line is classified in that business line.
A firm with multiple business lines is classified in the one that comprises more than 60% of total revenue.
If no business line meets the 60% test, classify the firm by a business line that accounts for more than 50% of total revenue, profits, or assets.
If no business line meets the 50% test, use judgment to select the most appropriate business line, or classify the firm as a conglomerate.

Question 3

Whats some limitations of classification systems?

Answer 3

Innapriopriate Groupings e.g. too wide or narrow
Companies selling multiple products
Geography - some companies are best examined on a regional/national basis instead of global
Need to constantly update groupings