Find all School-related info fast with the new School-Specific MBA Forum

It is currently 27 Aug 2014, 11:38

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

Over the past 5 years, Company X has posted double-digit

  Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:
1 KUDOS received
Manager
Manager
User avatar
Joined: 26 Aug 2010
Posts: 70
Location: India
Followers: 3

Kudos [?]: 39 [1] , given: 18

Over the past 5 years, Company X has posted double-digit [#permalink] New post 18 Oct 2010, 20:05
1
This post received
KUDOS
1
This post was
BOOKMARKED
00:00
A
B
C
D
E

Difficulty:

  25% (medium)

Question Stats:

61% (01:45) correct 39% (00:57) wrong based on 158 sessions
Over the past 5 years, Company X has posted double-digit growth in annual revenues, combined with a substantial improvement in operating margins. Since this growth is likely to persist in the future, the stock of Company X will soon experience dramatic appreciation.

The argument above is based on which of the following assumptions?

A)Company X has a large market share in its industry.
B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
C)The growth of Company X is likely to persist in the future.
D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
E) The stock of Company X will outperform other stocks in the same industry.
[Reveal] Spoiler: OA

_________________

Spread some happiness..Press Kudos! :)

Manager
Manager
avatar
Joined: 15 Apr 2010
Posts: 176
Followers: 3

Kudos [?]: 63 [0], given: 25

GMAT Tests User
Re: Assumption CR (500-600 level) [#permalink] New post 18 Oct 2010, 20:41
Use POE.

A)Company X has a large market share in its industry.
Irrelevant. Does not tell us how the value of the company's stocks will appreciate.

B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
This tells us that the Sales increased when the operating margins improved. Does not say anything about stock value.

C)The growth of Company X is likely to persist in the future.
Restatement. Does not say anything about stock value.

E) The stock of Company X will outperform other stocks in the same industry.
Comparison with stocks of other companies is irrelevant.

D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
Correct answer. Author is assuming that the price of the stock should be/will be higher due to the growth in revenues and improvement in operating margins.
_________________

Give [highlight]KUDOS [/highlight] if you like my post.

Always do things which make you feel ALIVE!!!

Manager
Manager
avatar
Joined: 29 Sep 2008
Posts: 154
Followers: 2

Kudos [?]: 25 [0], given: 1

GMAT Tests User
Re: Assumption CR (500-600 level) [#permalink] New post 18 Oct 2010, 21:17
D
Senior Manager
Senior Manager
User avatar
Status: Can't give up
Joined: 20 Dec 2009
Posts: 321
Followers: 2

Kudos [?]: 26 [0], given: 35

GMAT Tests User
Re: Assumption CR (500-600 level) [#permalink] New post 09 Nov 2010, 13:30
Isn't it too hard to assume D....any better explanation?
Manager
Manager
avatar
Joined: 12 Aug 2010
Posts: 66
Schools: UNC Kenan-Flagler, IU Kelley, Emory GSB
WE 1: 5 yrs
Followers: 3

Kudos [?]: 11 [0], given: 50

GMAT Tests User
Re: Assumption CR (500-600 level) [#permalink] New post 10 Nov 2010, 04:43
amma4u wrote:
Isn't it too hard to assume D....any better explanation?

Negate D.

The answer choice becomes:
The current price of the stock of Company X [strike]does not[/strike] fully reflects the promising growth prospects of the firm.

So it means that the growth and increasing OPM has already been factored in. So no more scope of growth in share value.

D is clearly the answer.
_________________

The night is at its darkest just before the dawn... never, ever give up!

Intern
Intern
avatar
Joined: 09 Oct 2010
Posts: 12
Followers: 0

Kudos [?]: 0 [0], given: 0

Re: Assumption CR (500-600 level) [#permalink] New post 10 Nov 2010, 10:15
Agree with yossarian84. Negation works best here.
Manager
Manager
User avatar
Joined: 07 Jul 2010
Posts: 101
Location: Hanoi, Vietnam
Followers: 1

Kudos [?]: 13 [0], given: 18

Re: Assumption CR (500-600 level) [#permalink] New post 25 Jan 2011, 09:02
D is correct. But this is a really good question.
_________________

Hung M.Tran
Faculty of Banking and Finance,
National Economics University of Vietnam


Follow me on Twitter : http://twitter.com/AndyTranHung

Manager
Manager
avatar
Joined: 27 Jul 2010
Posts: 197
Location: Prague
Schools: University of Economics Prague
Followers: 1

Kudos [?]: 15 [0], given: 15

GMAT ToolKit User GMAT Tests User
Re: Assumption CR (500-600 level) [#permalink] New post 26 Jan 2011, 07:23
D, straight, easy... wish all GMAT questions were like this one
_________________

You want somethin', go get it. Period!

Manager
Manager
avatar
Joined: 08 Dec 2010
Posts: 214
WE 1: 4 yr IT
Followers: 2

Kudos [?]: 45 [0], given: 26

Re: Assumption CR (500-600 level) [#permalink] New post 27 Jan 2011, 06:20
D. good question
_________________

this time, we play for keeps

Manager
Manager
avatar
Joined: 27 Oct 2010
Posts: 190
Followers: 1

Kudos [?]: 7 [0], given: 20

GMAT Tests User
Re: Assumption CR (500-600 level) [#permalink] New post 27 Jan 2011, 12:56
D. easy one. No more than 1 contender for OA.
Senior Manager
Senior Manager
avatar
Joined: 21 Mar 2010
Posts: 316
Followers: 5

Kudos [?]: 20 [0], given: 33

GMAT Tests User
Re: Assumption CR (500-600 level) [#permalink] New post 27 Jan 2011, 13:45
for those using negation technique- keep in mind that it is logical negation that works all the time and not the exact opposite. Check out the Powerscore Bible for more on that technique
Manager
Manager
avatar
Joined: 12 Sep 2010
Posts: 209
Followers: 2

Kudos [?]: 15 [0], given: 12

GMAT ToolKit User Reviews Badge
Re: Assumption CR (500-600 level) [#permalink] New post 27 Jan 2011, 15:44
What is the source of the question?

Image Posted from GMAT ToolKit
1 KUDOS received
Manager
Manager
avatar
Joined: 14 Nov 2008
Posts: 70
Followers: 2

Kudos [?]: 14 [1] , given: 1

Re: Over the past 5 years, Company X has posted double-digit [#permalink] New post 30 Aug 2013, 05:21
1
This post received
KUDOS
The argument concludes that the stock of the firm will experience rapid growth.
The basis for this claim is that the firm has shown strong historical performance
that is likely to continue in the future. The stock will appreciate dramatically in the
future as a result only if it has not already appreciated in anticipation of the
company's expected growth.
(A) The argument focused on the potential for stock appreciation rather than
company weight in the industry. A company with a large market share may well
experience poor stock performance, while a company with a small market share
may continue to grow and increase in value.
(B) Since the conclusion of the argument is made regarding the future outlook, it
is not necessary to assume that the company had been growing, or had even
existed, prior to the past 5 years. A new firm that has been in existence for only 5
years may well present an excellent investment opportunity.
(C) This statement is explicitly stated in the argument and therefore does not
have to be assumed.
(D) CORRECT. If this assumption were not true, i.e. if the current stock price
already reflects future growth prospects, then the premise that the company will
experience high growth is certainly insufficient to warrant future stock price
appreciation, since all of this growth would already be reflected in the current
price. It is necessary to assume that the current price of Company X stock does
not yet reflect the promising growth prospects of the firm, allowing the possibility
that the stock price will rise further.
(E) Note that the argument makes a claim about the absolute return of stock X
rather than its return relative to the industry. Therefore, to justify the rapid growth
in the stock price, it is not necessary to assume that the company will outperform
its competitors. For example, if the industry itself is growing very rapidly, other
companies in the industry can experience just as rapid appreciation in stock
prices.
Re: Over the past 5 years, Company X has posted double-digit   [#permalink] 30 Aug 2013, 05:21
    Similar topics Author Replies Last post
Similar
Topics:
Experts publish their posts in the topic Over the past ten years, the population of Dismaston has gro TooLong150 2 04 Mar 2014, 04:40
9 Over the past 5 years, Company X has posted double-digit anilnandyala 10 26 Nov 2010, 02:09
Why Darden's ranking been slippling over the past 5 year? admitted2009 4 15 Apr 2009, 19:45
Over the past 5 years, Company X has posted double-digit leonidas 9 28 Oct 2008, 10:09
4 Owner of JavaJoint: Over the past year, the coffee store has bepositive 51 21 May 2008, 07:53
Display posts from previous: Sort by

Over the past 5 years, Company X has posted double-digit

  Question banks Downloads My Bookmarks Reviews Important topics  


GMAT Club MBA Forum Home| About| Privacy Policy| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group and phpBB SEO

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.