Life cycle
The phases an industry passes through — embryonic, growth, shakeout, mature and declining — each with typical growth, competition and profitability. A guide to what tends to happen, not a timetable.
Where you will meet it
Life cycle appears in 3 learning outcomes on the CFA syllabus. A few of them:
- Assess trends in how large an industry is, its growth, its profitability and the market shares within it
“Growth separates volume from price and cyclical from structural change, and an industry's stage in its life cycle (embryonic, growth, shakeout, mature or declining) shapes both growth and competition.”
- Explain how spreadsheet models are used to project dividends and value common shares
“The benefit is flexibility: the model can follow whatever path the company's life cycle suggests, and it makes sensitivity testing of each assumption easy.”
- Propose, and defend, ways to handle a family's financial risks as a whole through working life and into retirement
“Exposures include earnings loss, premature death, disability, longevity, property, liability and market risk, and they change over the life cycle as human capital is converted into financial capital.”
See also
Practise it
Practise life cycle until it is automatic: questions that explain every wrong option.
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