🧩 Chapter 11: Industry Analysis — Mock Questions

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Q1. Industry analysis primarily helps an analyst understand:

A. Stock price movement
B. Broader competitive environment
C. Intraday volatility
D. Dividend payout ratio

Answer: B
✔ Industry analysis focuses on structure, competition, risks, and opportunities.

Q2. Which framework is most commonly used for industry competitiveness?

A. Maslow’s hierarchy
B. Porter’s Five Forces
C. SWOT analysis
D. Alpha-beta model

Answer: B
✔ Porter’s Five Forces assesses competitive pressure.

Q3. High entry barriers in an industry generally lead to:

A. Lower profitability
B. Higher long-term profitability
C. No impact
D. Frequent new competitors

Answer: B
✔ Hard-to-enter industries allow existing players to retain profits.

Q4. The threat of substitutes increases when:

A. Customers have few alternatives
B. Switching costs are low
C. Products are highly differentiated
D. Substitutes are expensive

Answer: B
✔ Low switching cost = easier to move to alternatives.

Q5. A cyclical industry is characterized by:

A. Stable demand regardless of economy
B. Demand linked to economic cycles
C. Government-fixed prices
D. No competition

Answer: B
✔ Cyclical sectors rise/fall with economic activity (e.g., autos, metals).

Q6. A defensive industry includes:

A. Automobiles
B. Luxury goods
C. Pharmaceuticals
D. Steel

Answer: C
✔ Pharma, FMCG perform steadily even in downturns.

Q7. Industry life cycle begins with:

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

Answer: C
✔ Stages: Introduction → Growth → Maturity → Decline.

Q8. Market concentration is high when:

A. Many small players exist
B. Top few companies dominate market share
C. Demand is fragmented
D. Switching cost is low

Answer: B
✔ Higher concentration → fewer players → greater pricing power.

Q9. Government regulations impact an industry by:

A. Changing promoter shareholding
B. Influencing entry, pricing, and competition
C. Fixing employee salary
D. Determining dividend payout

Answer: B
✔ Regulations can set prices, barriers, safety rules, etc.

Q10. Capacity utilization indicates:

A. Number of employees
B. How much production capacity is being used
C. Corporate governance quality
D. Dividend-paying ability

Answer: B
✔ Higher utilization → strong demand → better profitability.

Q11. An industry with high fixed costs and low variable costs will likely have:

A. High operating leverage
B. Low break-even sales
C. Stable margins
D. Constant profits

Answer: A
✔ High fixed costs → profits highly sensitive to sales volume.

Q12. Which industry factor can directly impact company valuation?

A. Weather updates
B. Industry growth rate
C. Employee birthdays
D. Company logo color

Answer: B
✔ Higher industry growth = higher valuation multiples.

Q13. Fragmented industries typically exhibit:

A. Strong pricing power
B. Low entry barriers
C. Higher profit margins
D. Limited competition

Answer: B
✔ Low entry barriers lead to many small competitors.

Q14. Economic moat in an industry is stronger when:

A. Products are commodities
B. Customer loyalty is low
C. Product substitution is easy
D. Brand differentiation is strong

Answer: D
✔ Strong brands protect industry profitability.

Q15. A major red flag during industry analysis is:

A. Rising demand
B. Decreasing profitability across most players
C. Innovation growth
D. Higher R&D investment

Answer: B
✔ When margins shrink across the industry → structural problems.


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