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CHAPTER 19 Stock Research Checklist—Cycl... > Do You Understand the Relationship o...

Do You Understand the Relationship of the Company’s Revenue Cycle in Relation to Economic Cycles in a Cyclical Company?

We can divide goods or services into two different categories: necessities and luxuries. Companies that are involved in creating or providing services as necessities are called non-cyclical companies. For example, food, health care, auto and home insurance, electricity, water, and gas are necessities.

Companies that produce luxury items or services are cyclical companies. People can postpone the purchase of these kinds of products. Cyclical products include automobiles, vacations, jewelry, furniture, and many more.

Cyclical stocks perform well during early economic recovery and economic expansion. Revenue starts to fall during the start of an economic slowdown and during a recession and reaches bottom before the economy starts to recover.


  

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