- CFA Exams
- 2025 Level I
- Topic 5. Equity Investments
- Learning Module 6. Industry and Competitive Analysis
- Subject 2. Industry Classification
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Subject 2. Industry Classification PDF Download
The first step is to define the boundaries of the industry in question and its constituents. Industries are commonly defined as companies that sell similar products or services.
Third-Party Industry Classification Schemes
The structures of these systems are very similar. Commercial industry classification systems include:
The limitation of current classification systems is that the narrowest classification unit assigned to a company generally cannot be assumed to constitute its peer group for the purpose of detailed fundamental comparisons or valuation. Companies can sell diverse products or services across many industries and products similarity is subjective. Geographical considerations and changes in groupings over time are 2 other limitations.
Alternative Methods of Grouping Companies
There are a few main approaches to classifying companies:
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