Since you were able to eliminate choices D and E, I will only focus on choices A, B, and C:
Lets first understand the meaning of the sentence:


Despite recent increases in sales and cash flow that have propelled automobile companies common stocks to new highs, several industry analysts expect automakers, in order to conserve cash, to set dividends more conservatively than they were.

·There have been recent increases in sales and cash flow of the automobile companies.
·These increases have pushed their stocks to new highs.
·However, several analysts expect automakers to set dividends more conservatively than they have been doing so in the past in order to conserve cash.


Now lets find the errors in the original sentence. We will begin this step by splitting the sentence in small parts so that we can focus our attention on each individual part of the sentence more carefully.
·Despite recent increases in sales and cash flow
o that have propelled automobile companies common stocks to new highs,
·(cont. of 1st Cl.) several industry analysts expect automakers, in order to conserve cash, to set dividends more conservatively
o than they were.

Now let us see what the errors are here:

1.The underlined portion of the sentence presents comparison. It intends to say that the automakers will have to be more conservative in setting dividends than they were before. So, the entity following the comparison marker "than" should be parallel to the entity preceding it. But here that is not the case. Here we have the case of ellipses where a few words are not repeated. But the words that are omitted must be there in the sentence before in the same form. Choice A ends with "they were". This means to complete this idea, we need to say "they were in setting the dividends." Notice that "setting" has not been used in the sentence before. Hence it cannot be omitted and thus the ellipsis is not done appropriately. So in order to correct this error, we will need to explicitly state the complete idea.

With this understanding of meaning and errors, lets analyze the remaining two choices B and C.
POE:
Choice A: Incorrect.
Choice B: Has the same error as in A.
Choice C: Corrects that error by writing the entire idea.

Hope this helps.

Regards,

Payal

aman88 wrote: When stuck here, ask yourself what does THEY referring to? Is it the dividends? Or analysts? Or automobile companies? Or automakers? Or the recent increases perhaps? 'THEY' has no clear referent which is why these choices are highly ambiguous.

Look at C now.

C: ... several industry analysts expect automakers ... to be more conservative than they have been in setting dividends. -> THEY clearly implies that the referent is 'automakers'.

Hence C is the right answer.

Thanks.

Aman, I noticed that you have used pronoun error as the means to eliminate choices A and B. Although you were able to arrive at the correct answer, it is very important that you arrive at it for the right reasons. In this question, pronoun ambiguity is not an issue. As you can see usage of "they" is consistent across all choices. So you cannot eliminate any choice based on the pronoun ambiguity. So as discussed in my solution post above, you will need to rely upon some other more deterministic error to get to choice C as the correct answer.

Hope that helps.

Happy Learning!

Payal