Canadian Securities Course (CSC) Level 2 Practice Exam

What type of industries are characterized as Declining Industries based on the text?

1. Continually developing

2. Unprofitable at first

3. Stop in growth or declining

4. Sale/earnings consistently expanding

The correct answer is: Stop in growth or declining

Declining industries are defined by a notable halt or reversal in growth trends, which can often be attributed to various factors such as changes in consumer preferences, advancements in technology that render certain products or services obsolete, or increased competition. Industries that experience stagnation or a decrease in demand typically have difficulty maintaining profitability and market share. In this context, the option indicating "stop in growth or declining" aligns perfectly with the characteristics of declining industries. Such industries may face challenges such as reduced sales, shrinking market sizes, and subsequently, are often considered less attractive for investment. Understanding the nature of declining industries is crucial for investors who aim to navigate market dynamics effectively.