Here is the solution for this question.
For each of the following statements, select yes if, based on the given information, it must be true, otherwise select no.
a.There are exactly two stocks that cannot be classified per both Stock Valuation and Profit Generation Capability classifications.
b.Among the four given stocks, the Volatile Bear-Struggler stock will turn to a Volatile Bull-Struggler stock if there is at the most 20 percentage point increment in its TOP.
c.The expense of the company whose stock is classified as “Rain Maker” is approximately $230 (nearest to $5). Solution:-
This question needs classification of stocks, so we first read the relevant data from the charts and classify the stocks.
For Stock Valuation Classification (SV Classification), we read the data from chart 1. The data is given below. We find that stock D cannot be classified per any category of SV Classification.
From Chart 1
For Profit Generation Capability (PGC) classification, we read the data from chart 2.
The percentage of profit is given as (profit/revenue)*100%.
Let’s take stock A first.
R/E ratio for A is 1.3 or 1.3/1. It means that for a revenue of $1.3, expense is $1, and profit is R-E=1.3-1=0.3. So % profit would be (P/R)*100 = (0.3/1.3)*100% =23.08%.
Similarly, for other companies, profit percentages are calculated given below.
From Chart 2
1. a.There is no stock that is not classified for both the categories. In the SV classification, stock D is not classified, whereas in the PGC classification, stock C is not classified. But both these stocks are classified per at least one of the categories, so the answer is NO.
1. b. B stock is Volatile Bear-Struggler. Let’s look at the criterion of Volatile Bull.
Volatile Bull - A stock whose TOP is more than 30% and BOTTOM is less than 10%.
Presently, TOP of stock B is 9% and BOTTOM is -12%. B only qualifies for the BOTTOM criterion of Volatile Bull.
To turn it to Volatile Bull, we need to increase its TOP by more than 30% -9% = 21 percentage points. It is more than 20 percent point increment. So the answer is no. No.
1. c.From the table, we know that A stock is the Rain Maker stock. The revenue of the company of stock A is approximately $230, and R/E ratio is 1.3. This gives expenses as 230/1.3 = $176.92. The value is not approximately $230, hence the answer is No.
Select the company pair below whose combined revenue to combined expense ratio is the least?
1. AC, 2.BC, 3. AB, 4. CDSolution:-
We should be wary of the fact that the question asks for combined revenue to combined expense ratio. We must not simply add their R/E ratios. From chart 2, we get their respective R/E values.
We need not calculate combined revenue and combined expense for each of the options. Logically, R/E ratios for C and D lie in bottom two, hence their combined revenue, and combined expense will also be least. So the answer is CD. The table below shows that combined revenue to combined expense ratio for CD will be the lowest. It lies between 1~0.9.
For each of the following statements, select yes if, based on the given information, it must be true, otherwise select No.
a. Companies whose stocks are classified as Volatile Bear earn more than 5% profit.
b. Company that is classified as Volatile Bull is not the company that earns the highest percentage profit.
c. BOTTOM of the company that is classified as Dessert is not the lowest among all stocks.
d. Stock that is classified as Rain Maker is also classified as Stable Cow.Solution:-
a.From the table above, we find that company B stock is classified as Volatile Bear. It earns 4.76% profit, which is less than 5%. So the answer is No.
b.From the table above, we find that company A stock is classified as Volatile Bull , and it is indeed the highest percentage profit earner - 23.08%. So the answer is No.
c.From the table above, we find that company D stock is classified as Dessert . Its BOTTOM value - 7%- is not the lowest among all stocks. The lowest BOTTOM is for stock B (-12%). So the answer is Yes.
d.From the table above, we find that Rain Maker stock is A, while Stable Cow stock is C. So the answer is No.
If you have any query, please ask.
| '4 out of Top 5' Instructors on gmatclub | 70 point improvement guarantee | www.e-gmat.com