Critical Reasoning

In 2000, Gregory's Grocery had a total of 50 stores in the United States and reported profits of $50 million in 2000. During the next five years, the chain added 20 stores per year for a total of 150 stores in the United States and Canada in 2005. Profits increased each year at a rate of 10 percent.
Which of the following can be concluded based on the passage above?

A. The stores in Canada were not as profitable as those in the United States.
B. Between 2000 and 2005, average revenue per store decreased.
C. On average, the stores were less profitable in 2005 than in 2000.
D. Profit per store, or average profit, will continue to decrease if the chain continues to expand the number of stores.
E. If Gregory's Grocery shuts down some of its stores, average profitability will increase.

[spoiler]OA: I am confused in one thing i.e the difference between Revenue and Profit. Why exactly is B wrong????

If I see option B then initially the average revenue which used to come was 1 million $ per store but if I increase 50 by 5% then it becomes 55 but at the same time the number of stores in 1 year increase to 70,therefore revenue goes less than 1 million USD.

Please clear my doubt.........[/spoiler]

Evidence: In 2000, 50 stores = $50 million profit. Added 20 stores/yr for 5 years, profit increase 10%/yr.

Question: What can be concluded?

Prediction: Look for an answer that is close to the statistics that requires the smallest assumptions.

A. Requires assumptions about the countries.
B. Some uncertainty here since we can't compare "profits" to "revenues"
C. This requires a lot less info than B. It's worded in a safe, general way and is correct.
D. We have no idea what the future holds.
E. We have no idea as to how certain stores affect profitability.

VivianKerr wrote:Evidence: In 2000, 50 stores = $50 million profit. Added 20 stores/yr for 5 years, profit increase 10%/yr.

Question: What can be concluded?

Prediction: Look for an answer that is close to the statistics that requires the smallest assumptions.

A. Requires assumptions about the countries.
B. Some uncertainty here since we can't compare "profits" to "revenues"
C. This requires a lot less info than B. It's worded in a safe, general way and is correct.
D. We have no idea what the future holds.
E. We have no idea as to how certain stores affect profitability.

Thanks a lot vivian for your response. Is there any difference between the meaning of profits & revenues?????

I treat this more as a quantitative than a verbal.
50 stores 50 million profits =profit/per store 1
after five years store 150 and profits 80 million(approx) profit per store 80/150 <1

Hence C

we dont have any idea about revenues.From profits we cannot say revenues increased/decreased.Profit can increase with decrease in revenues,and converse also possible.

IMO C

In very simple terms, profit = revenue - expenditure.. B cannot be right.. We don't know why profitability did not rise.. It could be because the revenues did not increase or the expenditures did not decrease..

need720+ wrote:IMO C

In very simple terms, profit = revenue - expenditure.. B cannot be right.. We don't know why profitability did not rise.. It could be because the revenues did not increase or the expenditures did not decrease..

Thanks a lot

B can be eliminated as it features revenue.

Profit is very different from Revenue.

You might want to remember this permanently as you will see this in the business world and GMAT Quant.

Profits = Sales(or Revenue) - Cost(Expenditure)

B uses the classical example of shell game as with a short glance, the reader might misread revenues as profits.