Critical Reasoning

A new company can offer stocks in an initial public offering (IPO) before the company has proven itself capable of generating long-term profits for its stockholders. If the company seems likely to generate profits, the stock price in the IPO will rise; if the company seems less likely to generate profits, the stock price in the IPO will fall. Today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed. Therefore, stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

Which of the following, if true, most weakens the argument above?


Companies that do not have profitable quarters are not profitable in the long run.

Stock price predictions for the Tenon Corporation's IPO have varied markedly over the last several months.

The last financial quarter has proven profitable for numerous other companies in addition to the Tenon Corporation.

Industry experts announced today that the raw materials from which the Tenon Corporation manufactures its products will become prohibitively expensive within the next month.

Most people who purchase stocks in an IPO decline to attend stockholders' meetings of the companies in which they own stock.

IMO D.
Raw material cost increases, profit decreases and Hence, IPO rates can fall.

I agree the best answer is D.

Since the argument says "if the company seems less likely to generate profits, the stock price in the IPO will fall."

Therefore prediction in increase of prices of raw materials could well prevent the increase in IPO prices.

Hence D.

What is OA ?

Most people who purchase stocks in an IPO decline to attend stockholders' meetings of the companies in which they own stock. tells us that the companies misguide people :twisted:

A new company can offer stocks in an initial public offering (IPO) before the company has proven itself capable of generating long-term profits for its stockholders. If the company seems likely to generate profits, the stock price in the IPO will rise; if the company seems less likely to generate profits, the stock price in the IPO will fall. Today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed. Therefore, stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

Which of the following, if true, most weakens the argument above?


Companies that do not have profitable quarters are not profitable in the long run.

Stock price predictions for the Tenon Corporation's IPO have varied markedly over the last several months.

The last financial quarter has proven profitable for numerous other companies in addition to the Tenon Corporation.

Industry experts announced today that the raw materials from which the Tenon Corporation manufactures its products will become prohibitively expensive within the next month.

Most people who purchase stocks in an IPO decline to attend stockholders' meetings of the companies in which they own stock.


maihuna,

request you to put numbers before the options!! PLEASE

This question although straight forward suffers from one deficiency.... i believe

there has to be premise to link the analyst announcement with its impact..???

but the correct option D... negates that with one more analyst..... thinking that both will have same impact...

not a good gmat problem

OA is D

maihuna wrote:OA is D

I suck

Option D was SO clear to be true. I should have cleaned my mind.

Answer is clearly D

A new company can offer stocks in an initial public offering (IPO) before the company has proven itself capable of generating long-term profits for its stockholders. If the company seems likely to generate profits, the stock price in the IPO will rise; if the company seems less likely to generate profits, the stock price in the IPO will fall. Today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed. Therefore, stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

Which of the following, if true, most weakens the argument above?

A) Companies that do not have profitable quarters are not profitable in the long run.
B) Stock price predictions for the Tenon Corporation's IPO have varied markedly over the last several months.
C) The last financial quarter has proven profitable for numerous other companies in addition to the Tenon Corporation.
D) Industry experts announced today that the raw materials from which the Tenon Corporation manufactures its products will become prohibitively expensive within the next month.
E) Most people who purchase stocks in an IPO decline to attend stockholders' meetings of the companies in which they own stock.

What is the problem with B?
If the price has been fluctuating, there is no guarantee that the that it will generate a profit in the long run.
Am I missing something?
Is it because only the predictions not price has been fluctuating?

Please clarify.

TheGraduate wrote:A new company can offer stocks in an initial public offering (IPO) before the company has proven itself capable of generating long-term profits for its stockholders. If the company seems likely to generate profits, the stock price in the IPO will rise; if the company seems less likely to generate profits, the stock price in the IPO will fall. Today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed. Therefore, stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

Which of the following, if true, most weakens the argument above?

A) Companies that do not have profitable quarters are not profitable in the long run.
B) Stock price predictions for the Tenon Corporation's IPO have varied markedly over the last several months.
C) The last financial quarter has proven profitable for numerous other companies in addition to the Tenon Corporation.
D) Industry experts announced today that the raw materials from which the Tenon Corporation manufactures its products will become prohibitively expensive within the next month.
E) Most people who purchase stocks in an IPO decline to attend stockholders' meetings of the companies in which they own stock.

What is the problem with B?
If the price has been fluctuating, there is no guarantee that the that it will generate a profit in the long run.
Am I missing something?
Is it because only the predictions not price has been fluctuating?

Please clarify.

The link established in the prompt is between company profits and future stock price. So that's the only question: are profits likely to remain healthy? Predictions regarding the price aren't relevant here.