TheAliMan Wrote: ------------------------------------------------------- > I just checked with CFAI Institute. Both answers > correct. HAHA!! This sums the question up beautifully! Although I did put Mature because I thought Transitional was a trap. I knew Transitional was mentioned somewhere, but it wasn’t mentioned as a phase in the industry life cycle
^^ it’s cool that they did that, however, the real answer was Mature. In one of Schweser’s practice exam was the exact same question, and I remember making a note of their explanation as “even a firm with above average growth can be in a mature stage.” +1 for all!
isnt it sad that we will NEVER actually know what answer they were looking for?
Now that this is solved lets continue the Flamingo or Normal Flamingo and E0 or E1 for PVGO debates.
Fandango?
yes, this is called sef confirmation bias
Page 310 clearly states “For many public companies assume growth falls into three stages: growth phase, transitional phase, and mature phase.” Yet, the question on the exam asked for Which Stage of the Life Cycle was the company in, so that rules out transitional phase The four stages are: pioneer, growth, mature, decline I answered Growth b/c the fact pattern said: “growth is above average.” Which is the textbook definition of the growth stage. Someone mentioned that the above average growth comes from M&A activity (but I do not remember reading that), which is textbook answer for for Mature stage. The answer is either Growth or Mature, regardless I’ll be taking L2 in 2010 
I put mature, I remember doing a question where the answer said companies at mature stage could still produce above average profits, but earning growth is decreasing and initiating a dividend is a sign for mature stage. And I remember reading somewhere that transitional is not a stage…
Alright guys, having read over this thread and looked over my books I think that we can safely narrow down the answer to two choices based on what the question asked this narrows it down to exactly on choice, here is the breakdown: 1. If the question asked for multistage DDM then the answer is unequivocally Transitional (see page 310 Vol.4 in the CFAI readings). 2. If the question asked for Industrial Life Cycle the answer is unequivocally Growth (see page 227-228 Vol.4 in the CFAI readings). The distinction our text makes between growth and mature that our text makes here is that growth companies grow at a rate above that of the economy whereas mature companies grow at exactly the growth rate of the economy. I think I recall the vignette saying something about the company still growing at above the economic growth rate which was a dead giveaway for me that Mature was not the answer. I picked growth simply because I didn’t remember it as a stage in any of the “cycle” models that we saw however I believe Transitional is the correct answer and have counted this as an incorrect for myself. -1
They asked for the stage according to the DDM model - thus it was transitional. -1 for me
adavydov7 Wrote: ------------------------------------------------------- > Alright guys, having read over this thread and > looked over my books I think that we can safely > narrow down the answer to two choices based on > what the question asked this narrows it down to > exactly on choice, here is the breakdown: > > 1. If the question asked for multistage DDM then > the answer is unequivocally Transitional (see page > 310 Vol.4 in the CFAI readings). > > 2. If the question asked for Industrial Life Cycle > the answer is unequivocally Growth (see page > 227-228 Vol.4 in the CFAI readings). The > distinction our text makes between growth and > mature that our text makes here is that growth > companies grow at a rate above that of the economy > whereas mature companies grow at exactly the > growth rate of the economy. > > I think I recall the vignette saying something > about the company still growing at above the > economic growth rate which was a dead giveaway for > me that Mature was not the answer. I picked growth > simply because I didn’t remember it as a stage in > any of the “cycle” models that we saw however I > believe Transitional is the correct answer and > have counted this as an incorrect for myself. > > -1 I put Growth as well, although I initially put Transitional. I did not have much of a clue anyway, so no regrets as I expect it to be wrong.
adrenalin Wrote: ------------------------------------------------------- > They asked for the stage according to the DDM > model - thus it was transitional. > > -1 for me Are you sure?? I hope that was not the case. That would be the only situation where Transitional would be right.
i also put growth… i thought transitional was a red herring… the company was growing at a rate > GDP = growth… it doesn’t matter if it is slowing down, its growth rate is still > GDP therefore definitely not mature
wasn’t it “recessionary trough”?
it is growth or mature. schweser has a question that matched the exam question, which said mature is the answer. looking at the CFA book makes it appear that it could be either, although i would have to say growth. However, it doesn’t seem like they would give us such an obvious answer to a question which makes me think mature. these questions are absolute BS.
woogie1 Wrote: ------------------------------------------------------- > questions are absolute BS. agreed
BS agreed. How many seeminly easy but actually ambigous BS questions…
Growth for me— although I am counting it as -1 in my tracking spreadsheet.
growth for me too… id fight it here but there is no point… -1 in the interest of conservatism
Apparently I am not alone in seeing this as growth. I felt the vignette described a company that was in transition from growth to mature. Therefore I took transition as a distractor and concluded growth as that was the state from which it was transitioning.