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Revenue - Profit : Kaplan Verbal

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Revenue - Profit : Kaplan Verbal

by magizhan » Tue Apr 20, 2010 8:15 pm
Since Arlene Hodges was installed as president
of the Caralis corporation, profits have increased
by an average of 11 percent per year. During the
tenure of her predecessor, the corporation's
profits averaged a yearly increase of only 7
percent. Obviously Ms. Hodges' aggressive
marketing efforts have caused the acceleration
in the growth of Caralis' profits.
Which of the following, if true, would most
weaken the conclusion drawn above?

(A)The corporation's new manufacturing
plant, constructed in the past year, has
resulted in a 15 percent increase in
production capacity.

(B)For each year of Ms. Hodges' presidency,
the corporation's financial records show
an increase in profits over the previous
year.

(C)During the tenure of Ms. Hodges'
predecessor, the corporation began an
advertising campaign aimed at capturing
consumers between the ages of 24 and
35.

(D)Since Ms. Hodges became president, the
corporation has switched the primary
focus of its advertising from print ads to
radio and television commercials.

(E)Just before he was replaced, Ms. Hodges'
predecessor directed the acquisition of a
rival corporation, which has nearly doubled
the corporation's yearly revenues.

OA is E. How does increase in revenue guarantee increase in profit?
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by fibbonnaci » Tue Apr 20, 2010 10:03 pm
the author makes the mistake of assuming hodges aggressive marketing efforts -> increased profits.
The predecessor might have have got in some changes in the company's plan that started bearing fruits now.
So in order to weaken, we need to identify that the increase in profits is due to some change that occured last year ie. while the predecessor prevailed!

This directly eliminates B and D.
Now among A, C and E,
C mentions that the advertising plan changed. But we do not know if the plan was well recieved or it bombed off. Hence Eliminated.

A talks about an increase in production capacity, but we do not know if an increase in production capacity leads to an increase in overall profits. Eliminated!

E talks about a change in the revenues. Though one needs to make an assumption that the expenditures did not vary significantly, this option comes close. No other option fits better than this one. Hence this is my answer choice.

Hope this helps!
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by magizhan » Wed Apr 21, 2010 1:59 am
Isn't the
conclusion: aggressive marketing efforts of hodges increased profits
given evidence: profit percentage increased in hodges tenure
assumption: aggressive marketing efforts is the reason

If a marketing effort begun prior to Hodges as per C resulted in no profit increase wouldn't it weaken the argument that the aggressive marketing efforts of Hodges is the cause. Shouldn't we give more importance to weaken the assumption/ conclusion that the aggressive marketing efforts of Hodges is the cause than the increase in profits given in the evidence? Such weaken/ strengthen questions with more than argument, one as a part of the evidence and the other as a part of the conclusion/ assumption confuses me. Please help.
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by sakali » Wed Apr 21, 2010 7:21 am
magizhan wrote:Isn't the
conclusion: aggressive marketing efforts of hodges increased profits
given evidence: profit percentage increased in hodges tenure
assumption: aggressive marketing efforts is the reason

If a marketing effort begun prior to Hodges as per C resulted in no profit increase wouldn't it weaken the argument that the aggressive marketing efforts of Hodges is the cause. Shouldn't we give more importance to weaken the assumption/ conclusion that the aggressive marketing efforts of Hodges is the cause than the increase in profits given in the evidence? Such weaken/ strengthen questions with more than argument, one as a part of the evidence and the other as a part of the conclusion/ assumption confuses me. Please help.
The conclusion states that Hodges' marketing is what caused the profit increase. To weaken the argument, the BEST answer will show that there is another explanation for the profit increase...its not only the marketing that caused it.

The problem with "C" is that it slightly supports the conclusion that marketing caused the profit increase.

E may not be 100% correct in the real-world, but its the BEST answer as it gives another explanation of what could cause the profit increase.
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by reply2spg » Wed Apr 21, 2010 8:00 am
100% E.
magizhan wrote:Since Arlene Hodges was installed as president
of the Caralis corporation, profits have increased
by an average of 11 percent per year. During the
tenure of her predecessor, the corporation's
profits averaged a yearly increase of only 7
percent. Obviously Ms. Hodges' aggressive
marketing efforts have caused the acceleration
in the growth of Caralis' profits.
Which of the following, if true, would most
weaken the conclusion drawn above?

(A)The corporation's new manufacturing
plant, constructed in the past year, has
resulted in a 15 percent increase in
production capacity.

(B)For each year of Ms. Hodges' presidency,
the corporation's financial records show
an increase in profits over the previous
year.

(C)During the tenure of Ms. Hodges'
predecessor, the corporation began an
advertising campaign aimed at capturing
consumers between the ages of 24 and
35.

(D)Since Ms. Hodges became president, the
corporation has switched the primary
focus of its advertising from print ads to
radio and television commercials.

(E)Just before he was replaced, Ms. Hodges'
predecessor directed the acquisition of a
rival corporation, which has nearly doubled
the corporation's yearly revenues.

OA is E. How does increase in revenue guarantee increase in profit?
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by gtvisa2002 » Fri May 07, 2010 9:23 am
magizhan wrote:Isn't the
conclusion: aggressive marketing efforts of hodges increased profits
given evidence: profit percentage increased in hodges tenure
assumption: aggressive marketing efforts is the reason

If a marketing effort begun prior to Hodges as per C resulted in no profit increase wouldn't it weaken the argument that the aggressive marketing efforts of Hodges is the cause. Shouldn't we give more importance to weaken the assumption/ conclusion that the aggressive marketing efforts of Hodges is the cause than the increase in profits given in the evidence? Such weaken/ strengthen questions with more than argument, one as a part of the evidence and the other as a part of the conclusion/ assumption confuses me. Please help.
Magizhan,

You are right, but consider this scenario, Merger is the bet way to achieve a larger customer base. If you acquire your rival then obivously your company will be the Monopoly and
1. there are no other big companies to compete with your products
2. ofcourse there is a chance of production cost reduction and you will not be reducing the price of your product
then your revenue and profits would increase. This is a best way to sell more of your products than ads.

Realtime example: United and Continental merger.

Though this seems to be bit drifted away from the scope, this is the strongest point which would weaken the conculsion.
HTH Thanks.
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