GMAT Question of the Day - Daily to your Mailbox; hard ones only

 It is currently 14 Dec 2019, 22:59

### 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

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

# A new company can offer stocks in an initial public offering (IPO) bef

Author Message
TAGS:

### Hide Tags

SC Moderator
Joined: 23 Sep 2015
Posts: 1713
A new company can offer stocks in an initial public offering (IPO) bef  [#permalink]

### Show Tags

11 Mar 2019, 20:52
1
4
00:00

Difficulty:

35% (medium)

Question Stats:

75% (01:48) correct 25% (02:01) wrong based on 173 sessions

### HideShow timer Statistics

A new company can offer stocks in an initial public offering (IPO) before the company has proven itself capable of generating long-term profits for its stockholders. If the company seems likely to generate profits, the stock price in the IPO will rise; if the company seems less likely to generate profits, the stock price in the IPO will fall. Today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed. Therefore, stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

Which of the following, if true, most weakens the argument above?

A. Companies that do not have profitable quarters are not profitable in the long run.
B. Stock price predictions for the Tenon Corporation's IPO have varied markedly over the last several months.
C. The last financial quarter has proven profitable for numerous other companies in addition to the Tenon Corporation.
D. Industry experts announced today that the raw materials from which the Tenon Corporation manufactures its products will become prohibitively expensive within the next month.
E. Most people who purchase stocks in an IPO decline to attend stockholders' meetings of the companies in which they own stock.

_________________
Simple strategy:
“Once you’ve eliminated the impossible, whatever remains, however improbable, must be the truth.”

GMAT Ninja YouTube! Series 1| GMAT Ninja YouTube! Series 2 | How to Improve GMAT Quant from Q49 to a Perfect Q51 | Time management

My Notes:
Reading comprehension | Critical Reasoning | Absolute Phrases | Subjunctive Mood
Manager
Joined: 23 Jan 2018
Posts: 221
Location: India
WE: Information Technology (Computer Software)
Re: A new company can offer stocks in an initial public offering (IPO) bef  [#permalink]

### Show Tags

11 Mar 2019, 20:57
1
Option D. We have to show although the mentioned company had a profit in last quarter,the future of the company is bleak. The option D does So.

Posted from my mobile device
Intern
Joined: 05 Mar 2019
Posts: 4
Re: A new company can offer stocks in an initial public offering (IPO) bef  [#permalink]

### Show Tags

12 Mar 2019, 07:30
the options were quite easy to eliminate.I even eliminated d option but after checking all answers d was more correct
SC Moderator
Joined: 23 Sep 2015
Posts: 1713
Re: A new company can offer stocks in an initial public offering (IPO) bef  [#permalink]

### Show Tags

14 Mar 2019, 08:05
2
aragonn wrote:
A new company can offer stocks in an initial public offering (IPO) before the company has proven itself capable of generating long-term profits for its stockholders. If the company seems likely to generate profits, the stock price in the IPO will rise; if the company seems less likely to generate profits, the stock price in the IPO will fall. Today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed. Therefore, stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

Which of the following, if true, most weakens the argument above?

A. Companies that do not have profitable quarters are not profitable in the long run.
B. Stock price predictions for the Tenon Corporation's IPO have varied markedly over the last several months.
C. The last financial quarter has proven profitable for numerous other companies in addition to the Tenon Corporation.
D. Industry experts announced today that the raw materials from which the Tenon Corporation manufactures its products will become prohibitively expensive within the next month.
E. Most people who purchase stocks in an IPO decline to attend stockholders' meetings of the companies in which they own stock.

Official Explanation

Conclusion: Stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

Premise: If the company seems likely to generate profits, the stock price in the IPO will rise; if the company seems less likely to generate profits, the stock price in the IPO will fall. Today, business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed.

Assumptions: There’s no other way to interpret the facts. The fact that the Tenon Corporation has turned a profit in the financial quarter just completed is proof that stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

The question stem asks which answer choice most weakens the argument, so this is a weaken question. This passage has an interpretation of evidence reasoning pattern, which can be identified by the presentation of a fact as evidence. The argument premise states that if a company seems likely to generate profits, the stock price in the IPO will rise and today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed. The argument then concludes that stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

The standard assumption of an interpretation of evidence reasoning pattern is that there’s no other way to interpret the facts. Because this is a weaken question, the correct answer will demonstrate that there is an alternative explanation for the evidence. In other words, that just because Tenon Corporation has turned a profit in the financial quarter just completed, doesn’t necessarily mean that stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise. Evaluate the answer choices, looking for a choice that matches this idea.

Choice A: No. Companies that do not have profitable quarters are out of scope. The premise indicates that Tenon Corporation has turned a profit in the financial quarter just completed.

Choice B: No. Stock price predictions for the Tenon Corporation’s IPO over the last several months are out of scope. The premise indicates that today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed.

Choice C: No. That The last financial quarter has proven profitable for numerous other companies is out of scope. Profits for other companies have no impact on stock prices for the Tenon Corporation's IPO.

Choice D: Correct. If Industry experts announced today that the raw materials from which the Tenon Corporation manufactures its products will become prohibitively expensive within the next month, then Tenon Corporation may seem less likely to generate profits. If this is the case, the stock price in the IPO will fall. Therefore, this weakens the argument that just because Tenon Corporation has turned a profit in the financial quarter just completed, stock prices for the Tenon Corporation's IPO will rise.

Choice E: No. That Most people who purchase stocks in an IPO decline to attend stockholders’ meetings is out of scope. There is no information regarding people who purchase stocks in an IPO or stockholders’ meetings of the Tenon Corporation.

The correct answer is choice D.
_________________
Simple strategy:
“Once you’ve eliminated the impossible, whatever remains, however improbable, must be the truth.”

GMAT Ninja YouTube! Series 1| GMAT Ninja YouTube! Series 2 | How to Improve GMAT Quant from Q49 to a Perfect Q51 | Time management

My Notes:
Reading comprehension | Critical Reasoning | Absolute Phrases | Subjunctive Mood
SVP
Status: It's near - I can see.
Joined: 13 Apr 2013
Posts: 1702
Location: India
GPA: 3.01
WE: Engineering (Real Estate)
Re: A new company can offer stocks in an initial public offering (IPO) bef  [#permalink]

### Show Tags

17 Mar 2019, 00:22
aragonn wrote:
A new company can offer stocks in an initial public offering (IPO) before the company has proven itself capable of generating long-term profits for its stockholders. If the company seems likely to generate profits, the stock price in the IPO will rise; if the company seems less likely to generate profits, the stock price in the IPO will fall. Today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed. Therefore, stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

Which of the following, if true, most weakens the argument above?

Conclusion : Therefore, stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

Support to the conclusion : If the company seems likely to generate profits, the stock price in the IPO will rise.

We should keep in mind that we are looking for "long term profit".

A. Companies that do not have profitable quarters are not profitable in the long run.

This is a strengthener saying indirectly that Companies with profitable quarter are profitable in the long run. But, we are concerned mainly about stocks/IPO and not the overall profit of TC.

B. Stock price predictions for the Tenon Corporation's IPO have varied markedly over the last several months.

Neutral choice : Beware of such answer choices that show neutral tone. "Varying markedly" may mean profit or loss both. So, don't think one dimensional in such choices.

C. The last financial quarter has proven profitable for numerous other companies in addition to the Tenon Corporation.

Neutral choice : We are concerned about future. Passage nowhere says that past profit has an impact on future trends.

D. Industry experts announced today that the raw materials from which the Tenon Corporation manufactures its products will become prohibitively expensive within the next month.

This choice shows that TC will not be able to generate profit most likely because manufacturing cost will become very high. Therefore, hardly any chance of getting profit and consequently no rise in stock prices.

E. Most people who purchase stocks in an IPO decline to attend stockholders' meetings of the companies in which they own stock.

Irrelevant
_________________
"Do not watch clock; Do what it does. KEEP GOING."
Re: A new company can offer stocks in an initial public offering (IPO) bef   [#permalink] 17 Mar 2019, 00:22
Display posts from previous: Sort by