Chapter 14: Industry Classification Flashcards
List the ten industry groups used in the FTSE industry used the FTSE classifcation systems
Financials Technology Basics materials Utilities Consumers goods Industrials Consumers services Health care Oil and Gas Telecommunications
Define the oil and gas economic group
List four typical characteristics of such companies
Oil and Gas
Involved in the extraction and supply of oil and gas products
Key characteristics
Large
Commodity Price dependent
high risk
Global
Describe the types of companies in the consumer goods sector
List 6 features of such companies
Manufacture consumer durables (cars, furniture, televisions and white goods) and non - durables (food and drink, pharmaceuticals, tobacco, health and household products, beverages and packaging)
Six features
Cyclical (durables) non cyclical (non durables)
increasingly capital intensive
moderate to high gearing
low profit margins - due to extreme competition
importance of brand names
increasingly international
List the types of companies found in the consumer services sector.
State three key features of such companies
Consumer service companies include food, drug and general retailers, transport, hotel and media companies, distributors, restaurants and pubs and support services
Three key features
Labour intensive
more defensive companies in the group have high gearing
domestic market is most important
Describe the type of companies found the utilities sector
List 6 key features of such companies
Supply continuously demanded services to households and business premises, eg electricity, water and distribution
6 features
Vulnerable to political risk, price controls and changes in regulations under which they operate
require extensive physical infrastructure; hence capital intensive
mostly nature monopolies
generally have low growth prospects/ leads to high gross dividend yield
despite stable demand and large capital requirements, financial gearing is low
largely dependent on domestic market, although some companies diversifying internationally
Describe the companies found in the financial sector
Includes banks, general insurance companies,life assurance companies, investment trusts and real estates companies
Bank’s highly geared and have volatile profits
General insurers have volatile profits and virtually no borrowings
Life insurers have stable profits and low gearing
Labour costs important for many companies in group
Domestic market most important but increasing globalisation
Describe the companies found in the technology sector
Companies involved in hardware, software and provision of computer services
Many companies yet to make profit or pay dividends
Dividend yields on are therefore low, and assets can be largely intangible
Describe the companies found in the healthcare sector
Companies involved in providing healthcare, medical equipment and supplies, as well as pharmaceuticals
Tend to be non - cyclical
Describe the companies found in the telecommunications sector
Companies involved in fixed line and mobile telephone services
State the type of companies in the basic materials and industrial sector
List eight distinctive features of industrial companies
Basic material companies usually produce intermediate goods such as chemicals, forestry building materials and metals.
Industrials are mainly involved in capital goods such as aircrafts, ships, machinery, electrical equipment, building materials and construction.
Eight distinctive features of industrial are as follows:
+Dependency on investment spending
+Cyclical in nature
+Companies profit move ahead of the trade cyclical
+Dependency on government spending
+Volatility of profits
+High profit margins when conditions are good
+Low gearing due to volatile profit
+Possibility of exposure to overseas market and competition.
