Critical Reasoning

gmatnmein2010 wrote:Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage over competitors that offer a wider range of products or services, an undiversified income stream can leave a company susceptible to major fluctuations in cash flow. We can see this tension realized when, for example, ________________.

Which of the following best completes the passage below?


1)a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
correctly identifies a company with a clear, narrow focus



2)an advertising agency loses one of its clients
does not specify any particular focus of the advertising agency nor does it demonstrate any major cash flow consequences due to the loss of the client

3)a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
shift of scope type

4)a construction company opts to use non-union labor to increase its profits
irrelevant to argument

5)a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients
Though the specialty sandwich store that uses local ingredients might be called a very focused company, there is no evidence presented that this focus has had any adverse effect on cash flow.

gmatnmein2010 wrote:Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage over competitors that offer a wider range of products or services, an undiversified income stream can leave a company susceptible to major fluctuations in cash flow. We can see this tension realized when, for example, ________________.

Which of the following best completes the passage below?

Find an answer choice that meets all of the following criteria :

1. something that focuses on one major product/service
2. that one major product is a primary source of income
3. the company suffers because primary source of income is cut off


1)a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
Correct : This answer choice meets all the above mentioned criteria. 1. the company focuses on speedy service 2. the company has to lay off staff which implies that speedy service is its primary source of income 3. the company's income stream is not diversified but concentrated only on local business which have now moved out of state leaving this local messenger company with major fluctuation in cash flow.

2)an advertising agency loses one of its clients
Incorrect : This does not meet even one criteria mentioned above.

3)a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
Incorrect : It shows that the company is not focused on one major product. It is in fact a diversified company interested in diversifying more [Good for LA Lakers Fans ]

4)a construction company opts to use non-union labor to increase its profits
Incorrect : There is no talk about focused product or primary source of income. Eliminated

5)a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients
Incorrect : Focusing on local ingredients DOES NOT mean focused product.

komal wrote:

gmatnmein2010 wrote:Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage over competitors that offer a wider range of products or services, an undiversified income stream can leave a company susceptible to major fluctuations in cash flow. We can see this tension realized when, for example, ________________.

Which of the following best completes the passage below?

Find an answer choice that meets all of the following criteria :

1. something that focuses on one major product/service
2. that one major product is a primary source of income
3. the company suffers because primary source of income is cut off


1)a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
Correct : This answer choice meets all the above mentioned criteria. 1. the company focuses on speedy service 2. the company has to lay off staff which implies that speedy service is its primary source of income 3. the company's income stream is not diversified but concentrated only on local business which have now moved out of state leaving this local messenger company with major fluctuation in cash flow.

2)an advertising agency loses one of its clients
Incorrect : This does not meet even one criteria mentioned above.

3)a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
Incorrect : It shows that the company is not focused on one major product. It is in fact a diversified company interested in diversifying more [Good for LA Lakers Fans ]

4)a construction company opts to use non-union labor to increase its profits
Incorrect : There is no talk about focused product or primary source of income. Eliminated

5)a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients
Incorrect : Focusing on local ingredients DOES NOT mean focused product.