CFAI Practice: M05 — Company Analysis

Source: CFAI CFA1 Equity Practice 2026 Total: 5 questions

Questions

Question 1

In Porter’s five forces framework, an industry with high barriers to entry and few substitute products is most likely to have:

  • A. Low profitability due to intense rivalry
  • B. Low profitability due to strong buyer power
  • C. High profitability due to limited competition

Question 2

A company in the decline stage of the industry life cycle most likely experiences:

  • A. Negative growth and overcapacity
  • B. Rapid revenue growth and increasing market share
  • C. Stable growth and high barriers to entry

Question 3

A firm pursuing a cost leadership strategy most likely:

  • A. Offers unique products at premium prices
  • B. Produces goods at the lowest cost in its industry
  • C. Focuses on a narrow market segment with specialized products

Question 4

When constructing a peer group for company comparison, an analyst should least likely include companies that:

  • A. Compete for the same customers
  • B. Have similar size and financial characteristics
  • C. Are in the same country but operate in entirely different industries

Question 5

The Global Industry Classification Standard (GICS) classifies companies based on their:

  • A. Geographic location and company size
  • B. Legal structure and ownership type
  • C. Principal business activity as determined by revenue and earnings sources