Critical Reasoning

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?

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

an advertising agency loses one of its clients

a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team

a construction company opts to use non-union labor to increase its profits

a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients

imo:A


OA"??

B

illustrating a drawback of one source of income

client for advertising agency might as well be only source of income. if the management failed to attract other clients and the only client goes company can go under.

Here the fault is entirely management's


In A that fault is not management's. If you are messenger service and all clients move out because of taxes, you cannot blame management for not diversifying into fast food, because your core business is messages!!!


fault is not management's

passage want to show how inaction of management can adversely affect business....

i did not read the rest of the options

OA is A.

What's ur explaination Raunekk ?

A because the local company is not diversified in that it is not operating in different states/countries. Dependence on only local residents to provide revenue streams makes them susceptible to changes such as increase in income tax which is what happened to them.

B is tempting but IMO wrong coz the advertising company has bunch of clients and has only lost one of them. We don't know if the remaining clients are diversified or not. Loosing one of many shouldn't presumably impact them.

Remaining options cite examples to the contrary in that the companies in those examples are well diversified

sjd00d wrote:A because the local company is not diversified in that it is not operating in different states/countries. Dependence on only local residents to provide revenue streams makes them susceptible to changes such as increase in income tax which is what happened to them.

B is tempting but IMO wrong coz the advertising company has bunch of clients and has only lost one of them. We don't know if the remaining clients are diversified or not. Loosing one of many shouldn't presumably impact them.

Remaining options cite examples to the contrary in that the companies in those examples are well diversified

Well explained sj00d!!

IMO A

Answer A seems to be logical one out of other answer choices