all about interpretation. Another stupid question from the CFA where anyone could really be correct
Based on page 310 vol. 4 of CFAI text, the answer is definately transitional.
If you’re looking for an industry stage according to the ddm model, it is definitely transitional. Now, the issue is that we all focused on regular industry life cycle model (which was not what the question was asking).
An f’d up question… All 3 answers looked right to me and could be argued for… I do not recall trnasitional being a stage tho… you can be transitioning between stages… I am pretty sure the question asked for stage, but i could be wrong… The beauty is, we will never ever ever ever know the right answer… they can ask me the same question next year, and i dont know that my answer would change… -1 for me… Lots of -1’s
mp2438 Wrote: ------------------------------------------------------- > answer was mature…there was a similar question > in one of the Schweser practice exams I believe. If Schweser said it, then it must be true. I find it funny that people are so certain of the answer. We’ll never know and there is plenty of room for interpretation as maddane said. The CFA exams are created with ambiguity. I think we have enough experience with the CFAI to say that is the case. From CFAI text: In this phase (transitional), earnings growth rates may be above average but declining towards the growth rate for the overall economy. Capital requirements typically decline in this phase, often resulting in positive free cash flow and increasing dividend payout ratios (or the initiation of dividends". baa168 could be correct that the question was simply meant to test our ability to memorize the Life Cycle phases or it could be an obscure question that the CFAI likes to pull out on exam day. Skillionaire’s description is very close to the passage I quoted, isn’t it? I’m willing to say that you guys could be right, but the claims that the answer is obvious is hardly the case. Isn’t there the remote possibility that the answer is ‘transition’? In the end, the only thing that matters is that we receive a"PASS" sometime in August. Good luck.
zizoubleu Wrote: ------------------------------------------------------- > mp2438 Wrote: > -------------------------------------------------- > ----- > > answer was mature…there was a similar > question > > in one of the Schweser practice exams I > believe. > > If Schweser said it, then it must be true. > > I find it funny that people are so certain of the > answer. We’ll never know and there is plenty of > room for interpretation as maddane said. The CFA > exams are created with ambiguity. I think we have > enough experience with the CFAI to say that is the > case. > > From CFAI text: In this phase (transitional), > earnings growth rates may be above average but > declining towards the growth rate for the overall > economy. Capital requirements typically decline > in this phase, often resulting in positive free > cash flow and increasing dividend payout ratios > (or the initiation of dividends". > > baa168 could be correct that the question was > simply meant to test our ability to memorize the > Life Cycle phases or it could be an obscure > question that the CFAI likes to pull out on exam > day. Skillionaire’s description is very close to > the passage I quoted, isn’t it? I’m willing to > say that you guys could be right, but the claims > that the answer is obvious is hardly the case. > Isn’t there the remote possibility that the answer > is ‘transition’? > > In the end, the only thing that matters is that we > receive a"PASS" sometime in August. Good luck. I didn’t use the CFAI text in my studies, so I apologize for my negligence in referencing Schweser (though not the most reliable source), but I remember putting in transitional in the practice exam or question, and then reading the answer saying it was mature, and is still possible to achieve above average growth during the mature cycle…so it was the choice that stuck out to me on the exam. Didn’t even think twice and just marked that.
Yes its Mature guys. Transitional was a trap. Pioneer, Growth, Mature, Stable, or Declining
I’m just busting your chops. There was alot of ranting about Schweser in the few weeks just before the exam. If I don’t pass, I’ll certainly use test prep providers for questions again, but readings will be CFAI.
Still time to report ambiguity on the exam… http://www.cfainstitute.org/cfaprog/resources/examdetails/testcomments.html
+1.
I just checked with CFAI Institute. Both answers correct.
skillionaire Wrote: ------------------------------------------------------- > “transitional is not a life cycle stage folks. > Theres a pioneer, growth, mature and decline. > Specifically the question asked for which STAGE IN > THE LIFE CYCLE. its obvious that it was a > transitional PHASE. definitly it was just a > distractor.” > > Yeah, wasn’t going to respond to individual > question threads, but this one is so blatantly > wrong I have to - pretty sure the answer is > “mature” (growth still above average but > declining, initiating a dividend, etc.). i second that. no such thing as a “Transitional” life cycle stage… I just hope it’s mature since that’s the one I picked :x
adalfu Wrote: ------------------------------------------------------- > skillionaire Wrote: > -------------------------------------------------- > ----- > > “transitional is not a life cycle stage folks. > > Theres a pioneer, growth, mature and decline. > > Specifically the question asked for which STAGE > IN > > THE LIFE CYCLE. its obvious that it was a > > transitional PHASE. definitly it was just a > > distractor.” > > > > Yeah, wasn’t going to respond to individual > > question threads, but this one is so blatantly > > wrong I have to - pretty sure the answer is > > “mature” (growth still above average but > > declining, initiating a dividend, etc.). > > i second that. no such thing as a “Transitional” > life cycle stage… I just hope it’s mature since > that’s the one I picked :x CFAI TEXT PG 310 This is relating to MULTISTAGE DDM, It says that for many publicly traded companies, practitioners assume growth falls into three stages (Growth, Transition, and Mature Phases) They list: Mature Phase-… Growth Phase… and… Transitional Phase- In this phase, which is a transition to maturity, earnings growth slows as competition puts pressure on prices and profit margins. In this phase, EARNINGS GROWTH RATES MAY BE ABOVE AVERAGE BUT DECLINING TOWARDS THE GROWTH RATE FOR THE OVERALL ECONOMY. sounds familiar… I put Mature, but I now believe Transitional was correct unless they tried tricking us by asking us which INDUSTRY life cycle it was or what PHASE it was in. FML
Transitional could be for the phase between any two consecutive phases. If that is the answer, then I will be surprised at the quality of questions.
http://www.cfainstitute.org/cfaprog/resources/examdetails/testcomments.html We should let them know how confusing this was
Transitional was so wrong, there is no phase like that. Went over this stuff like 4 times in MBA core courses
solar, the text is clear as two where transitional fits in. It’s been quoted a couple of times on this thread already. The contention is whether the question is referring to a life cycle phase or if it could have been referring to a multistage DDM phase. Agreed that the quality of question is…questionable. However, the CFAI always seems to throw in multiple questions per exam that are ‘off the radar’ for most candidates. That’s what makes me think that this particular question may get throw out b/c mature and transitional could be correct.
question was industry life cycle, there was no DDM reference in that question from 2000 miles
i also put transitional just because the description did not perfectly match both growth and mature stage… who knows!
The key here is that growth was still above average but declining…The fact that growth is still above average disqualifies it from being in the “mature” life cycle and the fact that growth is declining disqualifies it from being in the “growth” cycle. I put transitional. After reading the other posts I see that this is clearly the type of question that could go either way. I don’t understand this people that argue their point with such absolute certainty. Sorry to break it to you, but the right answer is the one CFAI picks, not the one you or I thinks is the right one. Based on the CFAI text (v4, pages 227, 310) it could go either way. But keep arguing away… Whatever gets you through the night…