Page 129 - DCOM504_SECURITY_ANALYSIS_AND_PORTFOLIO_MANAGEMENT

Security Analysis and Portfolio Management

Notes 1. Are the sales of industry growing in relation to the growth in Gross National Product
(GNP)?
2. What is overall return on investment (ROI)?

3. What is the cost structure of the industry?
4. Is the industry in a stable position? Does the success or failure of the industry depend upon
any single critical factor?

5. What is the impact of taxation upon the industry?
6. Are there any statutory controls in matters of raw materials allotment, prices and
distribution? Are they protective or crippling?

7. What is the industrial relations scenario of the industry?
8. Is the industry highly competitive? Is it dominated by one or two major companies? Are
they Indian or foreign? Is there sufficient export potential? Are international prices
comparable to domestic prices?
9. Is the industry highly technology-based? At what pace technological advancements are
taking place?
10. How does the stock market evaluate the industry? How are the leading scrips in the
industry evaluated by the stock market?

4.2.4 Forecasting Methods

The techniques for analyzing information about industry within a time framework are briefly
explained in this section.
1. The Market Profile: A market profile consists of those endogenous characteristics that
have a significant bearing on demand or the way in which it can be developed.
Its basic elements are:

(a) Number of establishments
(b) Geographical location of establishment
(c) Number of employees

(d) Value of sales
(e) Value added by manufacturing
(f) Capital expenditures
(g) Degree to which establishments are specialized

(h) Importance of their output in the national total
The trend of these elements when analysed, reveal vital information about the position
and progress of the industry. Illustratively some lead points are given here:
(a) A decrease in number of establishments and employment accompanied by an increase
in the other elements of the profile means increased automation.
(b) An increase in value of sales, unaccompanied by an increase in value added and
capital expenditure signifies rising prices.

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