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2) In a leveraged buyout, investors borrow huge sums of

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2) In a leveraged buyout, investors borrow huge sums of [#permalink] New post 24 Jan 2012, 10:17
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49% (02:15) correct 51% (01:09) wrong based on 65 sessions
2) In a leveraged buyout, investors borrow huge sums of money to buy companies, hoping to pay off the debt by using the company's earnings and to profit richly by the later resale of the companies or their divisions.

A. by using the company's earnings and to profit
B. by using the companies' earnings and by profiting
C. using the companies' earnings and profiting
D. with the company's earnings, profiting
E. with the companies' earnings and to profit

please correct my understanding company's is an apostrophe form for the singular company. companies is plural..if this is the case why is option E right.. I understand company's earnings is stressing on a how the earnings of a company can be used to pay off debts

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Re: company's vs. companies [#permalink] New post 24 Jan 2012, 12:27
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Hi, there. I'm happy to help with this. :)

First, the original question:
2) In a leveraged buyout, investors borrow huge sums of money to buy companies, hoping to pay off the debt by using the company's earnings and to profit richly by the later resale of the companies or their divisions.
A. by using the company's earnings and to profit
B. by using the companies' earnings and by profiting
C. using the companies' earnings and profiting
D. with the company's earnings, profiting
E. with the companies' earnings and to profit


First of all, you are perfectly right: company's refers to something belonging to one company, and companies' refers to something belonging to more than one company. Absolutely true.

Without even delving into the singular/plural thing, notice we could deduce the correct answer from (a) completing the correct parallel structure --- two infinitives "to pay" // "to profit", and (b) the idiomatic usage "paying with" something, not "paying by using" something --- I pay with money, I don't pay by using money. Just those two alone are enough to isolate answer E.

Nevertheless, you ask an excellent question. How do we know for a fact that we are talking about plural companies at that point in the sentence?

Well, first of all, the first part of the sentence mentions the plural --- "buying companies". If the sentence were going to switch from plural to singular, it would have to somehow signal that shift. For example: "Every day I meet dozens of new people, and I ask each one about his . . . " The word "each" is a typically way to signal that the attention has shifted from plural to singular. We have no such signal here.

More important -- when companies are mentioned again toward the end of the sentence --- "resale of the companies" --- it's plural. If company is plural before the underlined portion and plural after the underline portion, it has to be plural in the underlined portion. The GMAT simply does not swap back and forth from singular to plural like that in a single sentence without practically renting billboard space to advertise the change.

Also, think about the real world scenario. If I buy one company in a leveraged buyout, I use that one company's earnings to pay my debt. If I buy fifteen companies, I use the earnings of all 15 companies to pay my debt. (Perhaps you aren't old enough to remember the feeding frenzy of leveraged buyouts in the 1980s.) There is nothing incongruous in discussing "companies' earnings", especially if one person is gobbling up the earnings of several companies at once.

OK, does all that answer you question? Does that all make sense? Please let me know if you have any questions.

Mike :)
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Re: company's vs. companies [#permalink] New post 25 Jan 2012, 04:33
Very helpful explanation Mike. Thank you.
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Re: company's vs. companies [#permalink] New post 25 Jan 2012, 06:31
failed to point out parallelism ..

looks like a tricky one
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Re: 2) In a leveraged buyout, investors borrow huge sums of [#permalink] New post 24 Dec 2013, 13:25
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: 2) In a leveraged buyout, investors borrow huge sums of   [#permalink] 24 Dec 2013, 13:25
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