Canadian Securities Course (CSC) Level 2 Practice Exam

What kind of industries are labeled as Growth Industries according to the text?

1. Stop in growth or declining

2. Slower/stable growth

3. Unprofitable at first

4. Sale/earnings consistently expanding

The correct answer is: Sale/earnings consistently expanding

The designation of growth industries is primarily tied to the characteristic of consistently expanding sales and earnings. These industries are typically associated with strong potential for innovation, emerging technologies, or shifts in consumer preferences that enable them to capture increased market share over time. As a result, companies within growth industries often reinvest their earnings back into the business to fuel further expansion rather than focusing on immediate profit generation. While options like being unprofitable at first might apply to certain start-ups or new industry entrants, it does not define the overall characteristics of growth industries themselves, which are focused on positive growth trends in sales and earnings. This consistent expansion is what sets growth industries apart from others that might be in a state of decline or stable growth without significant upward momentum.