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SLIDE 8H Presentation of Content Let’s say someone handed you a list containing the names of thousands of sports teams. The teams come from all over the world – professional, amateur, college, high school, men’s teams, women’s teams, any and all sports and age groups. They asked you to sort and group the teams so that their stats could be compared. How would you do it? Would you group by sport? Gender? Region? Age level? Grade level? Country? Continent? In the world of commerce, businesses are grouped by industry to enable comparison of financial stats. Commerce by Industry Commerce is the sum of many parts. Nothing illustrates this concept better than the Global Industry Classification Standard (GICS ® ) . GICS ® is a taxonomy (classification system) developed by Morgan Stanley Capital International (MSCI) and Standard & Poor (S&P) primarily for use in the stock market. It classifies all the business industries that make up commerce. Analysts and investors use it to compare companies, and evaluate industries and business trends . It’s application is universal . Virtually every kind of for-profit business in the world, big and little, offering any and every kind of service or product fits into this classification scheme. Not-for-profit organizations , such as government agencies, public sector services, NGOs, hospitals, schools, the military, and universities are not represented. (Recall NGOs are non-government, nonprofit organizations.) Direct students to the chart in Chapter 8 of the workbook. Introduce and review the chart. 1. Point to sectors . Sectors are wide segments of the economy in which businesses share the same or a related products or services . Note that there are ten sectors. Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Telecommunication Services, and Utilities. In the business and financial news, references are often made to economic activity “within a sector .” 2. Point to Industry Groups . Sectors are made up of 24 Industry Groups into which similar types of business fit. 3. Point to Industries. Industry Groups consist of 68 Industries which are specific groupings of companies with highly similar business activities . 4. Point to Sub-Industries. Sub-industries represent an even more specific division of types of businesses. The 154 sub-industries group companies by very specific criteria such as substantially similar products or services, company size and income . If you were to devise a scheme for comparing the stats of the thousands of sports teams, you would probably come up with a similar type design. Grouping and categorizing businesses enables the comparison of their financial performance. By grouping and reducing industries to sub-industries, a more accurate comparison (apples-to-apples) can be made. PRODUCT PREVIEW
129 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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