Determining Industry Size, Growth, Characteristics, Profitability and Market Share trends
The process of industry and competitive analysis is a crucial part of understanding the business landscape. It begins with defining an industry, followed by a comprehensive survey to gather essential information for its evaluation. This survey involves several key steps,…
Industry Classification Methods and Grouping Methods for Companies
An industry is generally defined as a collection of companies that offer similar products or services as perceived from a customer’s perspective. For instance, Apple, Samsung, and Huawei can be grouped as they offer smartphones and related services. However, defining…
Evaluating a Company’s Capital Investments and Structure
Sources and Uses of Capital Companies invest capital that they acquire from debt and equity investors. Their primary goal is to earn returns that exceed the investors’ required rates of return. A significant part of company analysis involves assessing whether…
Evaluating a Company’s Revenue and Revenue Drivers
Revenues represent the total sales a company achieves within a specific period, often before any expenses or deductions. This metric offers a snapshot of a company’s ability to sell its goods or services. In many ways, it serves as the…
Understanding a Company’s Business Model
Understanding a company’s business model is the first step in conducting an industry and company analysis. This process is crucial as it helps in summarizing the key drivers of a company’s financial results and position. It also assists in focusing…
CFA Level 1 Study Notes – Equity Investments
Study Session 12 Reading 36 – Market Organization and Structure – LOS 36a: explain the main functions of the financial system – LOS 36b: describe classifications of assets and markets – LOS 36c: describe the major types of securities, currencies,…
Present Value Models to Value Equity
Present value models are based on a fundamental tenet of economics stating that individuals defer consumption to reap future benefits. Therefore, the value of an investment today should be worth the present value of expected future benefits, defined as dividends…
Voting Rights and Ownership Characteristics
In addition to issuing common or preference shares, companies can also issue different classes of these shares to further tailor the securities to the needs of the company and its investors. Common Shares Voting rights: Different classes of common shares…
Strategic Analysis of an Industry
Determining which industries will earn economic profits (return on invested capital in excess of the cost of capital) is typically dependent on understanding the competitive environment within the industry. Thus, strategic analysis is the competitive environment analysis, emphasizing the implications…
