🧩 Chapter 5: Industry Analysis — Mock Questions

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Q1. Industry analysis helps an analyst to evaluate:

A. Only past performance
B. Economic trends only
C. Industry structure, competitiveness & growth prospects
D. Share price movement alone


✅ Answer: C
Explanation: Industry analysis examines competition, demand, growth drivers, cost structures, and risks.

Q2. The primary objective of Porter’s Five Forces model is to assess:

A. Company profitability
B. Industry attractiveness and competitive intensity
C. Government policy
D. Currency risk


✅ Answer: B
Explanation: Five Forces framework evaluates competitiveness & profitability potential of an industry.

Q3. In Porter’s model, high entry barriers generally lead to:

A. Reduced competition
B. Lower profitability of incumbents
C. Higher threat of substitutes
D. High bargaining power of buyers


✅ Answer: A
Explanation: Difficult entry → fewer competitors → stable profitability.

Q4. A substitute product imposes the highest threat when it is:

A. Expensive and less efficient
B. Cheaper and easily available
C. Difficult to produce
D. Unrelated to the needs of consumers


✅ Answer: B
Explanation: A low-cost substitute can shift consumer preference quickly.

Q5. The life-cycle stage with slow growth and intense competition is:

A. Introduction
B. Growth
C. Maturity
D. Decline


✅ Answer: C
Explanation: Mature industries grow slowly; competition peaks.

Q6. Which of the following best describes a cyclical industry?

A. Stable regardless of economic conditions
B. Moves in sync with economic cycles
C. Declines in a booming economy
D. Always recession-proof


✅ Answer: B
Explanation: Cyclical industries (auto, real estate) rise in boom & fall in recession.

Q7. FMCG and healthcare are examples of:

A. Defensive industries
B. Cyclical industries
C. Seasonal industries
D. Declining industries


✅ Answer: A
Explanation: Defensive industries are less sensitive to economic swings.

Q8. Which indicator is most useful in analyzing an industry’s growth potential?

A. Dividend payout trends
B. Market size & demand expansion
C. CEO compensation
D. Stock volatility


✅ Answer: B
Explanation: Market size, demand drivers & adoption rates reflect growth prospects.

Q9. Industry cost structure is important because it indicates:

A. Dividend policy of companies
B. Competitive intensity based on fixed vs variable costs
C. Employee turnover
D. Cash flow in banking sector


✅ Answer: B
Explanation: High fixed-cost industries see price wars during downturns.

Q10. Which metric shows an industry's pricing power?

A. High inventory turnover
B. Rising operating margins
C. Declining debt levels
D. Negative cash flows


✅ Answer: B
Explanation: Strong margins indicate ability to increase prices without losing demand.

Q11. A fragmented industry is one where:

A. One or two players dominate
B. Large number of small competitors exist
C. Government owns most companies
D. No competition exists


✅ Answer: B
Explanation: Fragmented = many players, none with dominant share.

Q12. Consolidation in an industry typically leads to:

A. Lower margins
B. Lower pricing power
C. Reduced competition & stronger margins
D. Higher number of players


✅ Answer: C
Explanation: Consolidation = fewer players → better pricing & scale benefits.

Q13. Which of the following is NOT a barrier to entry?

A. Heavy capital requirements
B. Strong brand loyalty
C. Patents
D. Low investment and open regulatory environment


✅ Answer: D
Explanation: Low entry barriers make new competition easier.

Q14. Industry analysis should consider global trends especially for:

A. Local grocery retail
B. IT services and commodities
C. Small textile shops
D. Barber services


✅ Answer: B
Explanation: Globally-linked industries are influenced by international demand & prices.

Q15. A high capacity utilization rate in an industry generally indicates:

A. Weak demand
B. Under-utilisation of resources
C. Strong demand or supply constraints
D. Fall in profitability


✅ Answer: C
Explanation: High utilisation reflects rising demand or limited fresh capacity.

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