country of Veltria

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country of Veltria

by ket » Mon Jun 08, 2009 1:45 am
In the country of Veltria, the past two year's broad economic recession has included a business downturn in the clothing trade, where sales are down by about 7 percent as compared to two years ago. Clothing wholesalers have found, however, that the proportion of credit extended to retailers that was paid off on time fell in the first year of the recession but returned to its prerecession level in the second year.

Which of the following, if true most helps to explain the change between the first and the second year of the recession i the proportion of credit not paid off on time?

A. The total amount of credit extended to retailers by clothing wholesalers increased between the first year of the recession and the second year.

B. Between the first and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular increase.

C. Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually al were forced to go out of business during its first year.

D. Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise.

E. Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the first year of the recession

I chose A the OA is C though, please explain.

THX

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country of Veltria

by tohellandback » Mon Jun 08, 2009 1:57 am
IMO C.

A) Credit extended to retailers increased. it doesn't say anything about how much the retailers returned.

B)if the prices increased, the retailers should have had difficulty returning the credit.

C)Correct. Since the retailers with financial difficulties are out of business, the remaining ones could easily pay off their debt. This explains why credit extended to retailers that was paid off on time fell in the first year of the recession but returned to its prerecession level in the second year.

D)Attempted: not sure if they could really do it.

E) out of scope.
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Re: country of Veltria

by ket » Mon Jun 08, 2009 3:51 am
tohellandback wrote:IMO C.

A) Credit extended to retailers increased. it doesn't say anything about how much the retailers returned.

B)if the prices increased, the retailers should have had difficulty returning the credit.

C)Correct. Since the retailers with financial difficulties are out of business, the remaining ones could easily pay off their debt. This explains why credit extended to retailers that was paid off on time fell in the first year of the recession but returned to its prerecession level in the second year.

D)Attempted: not sure if they could really do it.

E) out of scope.

Thanks now I think I get the point.

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by rahulramteke » Tue Aug 02, 2011 10:57 am
It is actually a close call between C and D. Though the OA is C, i would like to question its reasoning . If anyone can justify then i would be happy to accept C.

My reasoning:-
C - If all were forced out of business during its first year then it might be true that they had atleast repayed some part of the credit. This means the second year was left with a smaller number of repayers for the total credit that was borrowed. Hence this might not support the return of prerecession levels.

D - Clothing retailers at least attempted to stimulate sales which might at least have led to some sales at discounted prices and helped in taking the repayment rates to prerecession levels..

Any expert replies.. ??

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by rkanthilal » Tue Aug 02, 2011 6:30 pm
rahulramteke wrote:It is actually a close call between C and D. Though the OA is C, i would like to question its reasoning . If anyone can justify then i would be happy to accept C.

My reasoning:-
C - If all were forced out of business during its first year then it might be true that they had at least repayed some part of the credit. This means the second year was left with a smaller number of repayers for the total credit that was borrowed. Hence this might not support the return of prerecession levels.

D - Clothing retailers at least attempted to stimulate sales which might at least have led to some sales at discounted prices and helped in taking the repayment rates to prerecession levels..

Any expert replies.. ??
Not an expert, but here are my thoughts on C and D...

C. "Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually all were forced to go out of business during its first year." Correct. We need an answer that explains the change between the first and second year of the recession in the proportion of credit not paid off on time. This answer does that. This answer tells us that in the first year of the recession the financially weak retailers were forced out of business. These weak retailers would have contributed to the decline in the proportion of credit that was paid off on time in the first year of the recession. In the second year, "virtually all" of the weak retailers were already out of business. Since the weak retailers are out of business, the credit extended in the second year would have been to financially stronger retailers on average. These remaining strong retailers are more financially capable of repaying the credit extended to them resulting in a higher proportion of credit repaid in the second year. This answer choice gives us a possible explanation for the difference in repayment rates.

D. "Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise." Incorrect. All this answer tells us is that retailers discounted merchandise in the second year. This answer says nothing about the results of that strategy. The retailers "attempted to stimulate sales"; however, we don't know whether they were successful or not. This is not enough information to explain the difference in credit repayments.

Even if we knew that retailers increased sales by discounting merchandise it wouldn't be enough to explain the difference in the proportion of repayments. We don't know what effect this strategy had on the retailer's profit. It is possible that sales went up while profits went down. In this case the strategy of discounting merchandise could have led to those retailers not repaying the credit.

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by rahulramteke » Wed Aug 03, 2011 7:29 am
Nice n clear .. thanks a lot mate .. cheers ....

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by BlindVision » Wed Aug 03, 2011 12:36 pm
ket wrote:In the country of Veltria, the past two year's broad economic recession has included a business downturn in the clothing trade, where sales are down by about 7 percent as compared to two years ago. Clothing wholesalers have found, however, that the proportion of credit extended to retailers that was paid off on time fell in the first year of the recession but returned to its prerecession level in the second year.

Which of the following, if true most helps to explain the change between the first and the second year of the recession i the proportion of credit not paid off on time?

A. The total amount of credit extended to retailers by clothing wholesalers increased between the first year of the recession and the second year.

B. Between the first and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular increase.

C. Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually al were forced to go out of business during its first year.

D. Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise.

E. Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the first year of the recession

I chose A the OA is C though, please explain.

THX
C

Constructively, this is a poorly written question...

What is the source of the question?
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by melguy » Wed Dec 07, 2011 10:30 pm
OG 12 CR Q92

This is a tricky one. I spent almost 3 mins but finally spotted the trap after re-reading the question carefully.

There was the reason that people were unable to pay back the loan in year one (keeping in mind that the reason did not exist or to a lesser extend in year 2).

Reason: People who were doing hard went out of business. So only strong players remained in the market who could carry on paying back the loan.

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by tuanquang269 » Thu Dec 08, 2011 4:16 am
IMO C