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Because competition has dramatically lowered margins in the industry,

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Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.
[Reveal] Spoiler: OA

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Last edited by TaN1213 on 27 Jul 2017, 23:12, edited 4 times in total.

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Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 27 Jul 2017, 23:12
TaN1213 wrote:
Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.



Edit: I had difficulty in buying the explanation provided for the correct answer. Would like to request Veritas / VeritasPrepkarishma to provide me with an overt explanation.
Explanation provided :
"In an Inference problem, the right answer must be true, meaning that you can use process of elimination to rule out any answers that could be false.

Here A is a prime candidate to be eliminated. You know from the stimulus that Euroquest must cut personnel expenses by 15% in order to remain solvent, but does that mean that if it does so it will definitely remain solvent? Process of elimination for "could be false" includes hypothetical situations: what if Euroquest was hit with a massive lawsuit, or its offices were destroyed by a flood and it couldn't afford to rebuild?

Choice B must be true, and can be proven by what is known in formal logic as the contrapositive. If reducing these expenses by 25% is a necessary requirement for staying solvent, then if the company does not meet that requirement you know that it cannot remain solvent.

Choice C can also be eliminated via a hypothetical situation. Sure, it may be that the competition referenced in the argument is driving costs down, but what if Euroquest is in a resources-starved industry - say its primary ingredient is enriched uranium - and competition is driving up the price of raw materials. That would be consistent with the facts but violate the conclusion, so choice C can be eliminated.

Choices D and E are related to each other, each drawing a conclusion about how Euroquest's competitors are faring with regard to personnel expenses. You cannot draw a conclusion about the competition without any further information about those companies. D may be incorrect because, while Euroquest may need to cut expenses by 15%, its competitors may be so inefficient that they have to cut by 40 or 50%. And E may be incorrect because of the converse: Euroquest is the inefficient one, and everyone else can simply stay the course. You just don't know, so D and E are incorrect. Choice B is the correct answer. "
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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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Hello Experts,

Need your help here:

I donot agree with OA.

We are given in order to remain solvent, it has to cut atleast 15%.

Now, B is saying if it cannot cut atleast 25%, it will not remain solvent.

What if it cuts 20%. As per the premise, it can still remain solvent.

Hence, B cannot be the correct answer.

Including B, all the options cannot be inferred. There is something wrong with the question.

Please confirm.
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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 28 Jul 2017, 05:40
I don't get the logic behind the OA. The argument says atleast 15%. How does reduction by 25% to be solvent be inferred from the passage? I am confused. 25% seems too specific to be the right option.

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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 29 Jul 2017, 01:59
Exactly! I had the very same explanation to be unable to agree with OA.
Experts / veritas please assist.
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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 29 Jul 2017, 02:46
TaN1213 wrote:
Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?


Competition -> Lower margins => Euroquest must reduce expenditures by 15% in order to remain solvent.
Euroquest would have to cut entire divisions and benefit programs which would reduce expenditure by 25%

Quote:
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.

We cannot infer any of these from the passage above, so all three of them are out!

Quote:
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.

I chose B and it was the right answer, but these 2 statements are almost saying the same thing, just in reverse order.
The only thing reason I rejected A was because it states that the firm will remain solvent if the expenditure is cut by 25%, whereas the passage states that this feat would be possible with as little as a 15% expenditure cut.

Anyway, Anyone else has thoughts on this?
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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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I think that the argument like this way:

Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. (OK, then Euroquest must reduce PE by at least 15%...)

In order to do so (reduce PE by at least 15%),
Euroquest would have to cut entire divisions and benefits programs (mean that Euroquest must do those things to reduce PE by at least 15% or reduce nothing)
such that it would reduce personnel expenditures by a full 25% over the next year (those things have some side-effects that make Euroquest could reduce PE by up to 25%. On the other hand, this means that Euroquest must apply those things to reduce PE by 25% or nothing would change)
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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 29 Jul 2017, 09:37
Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. Option B is clearly not correct. Please correct me if I am wrong.

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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 29 Jul 2017, 10:30
X = remain solven

Y = reduce personal expenditure by at least 15%

Z = reduce personal expenditure by a full 25%

25% is larger than 15%, so 25% satisfies "at least 15%". So Y = Z

Fact: X ---> Y = Z

Inference: NOT Z (or NOT Y) ---> NOT X.

B coneys the above reasoning.

Just my 2 cents :)

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Because competition has dramatically lowered margins in the industry, [#permalink]

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Quote:
Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.


reduce personnel expenditure by 25% == necessary condition
remain solvent = sufficient

In other words, if Euroquest remained solvent then it must have met necessary condition (reduce expenses by 25%)

Quote:
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.

reducing expenses is a necessary condition, not sufficient i.e. there could be other factors at play here

Quote:
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.

Not(necessary) --> not (sufficient)
Thus, not reducing expenses guarantees default. Ans. B

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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 30 Jul 2017, 09:08
broall wrote:
I think that the argument like this way:

Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. (OK, then Euroquest must reduce PE by at least 15%...)

In order to do so (reduce PE by at least 15%),
Euroquest would have to cut entire divisions and benefits programs (mean that Euroquest must do those things to reduce PE by at least 15% or reduce nothing)
such that it would reduce personnel expenditures by a full 25% over the next year (those things have some side-effects that make Euroquest could reduce PE by up to 25%. On the other hand, this means that Euroquest must apply those things to reduce PE by 25% or nothing would change)

Thanks for the explanation.. Now it all makes sense to me.

Just do it !
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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 07 Aug 2017, 03:34
abhimahna wrote:
Hello Experts,

Need your help here:

I donot agree with OA.

We are given in order to remain solvent, it has to cut atleast 15%.

Now, B is saying if it cannot cut atleast 25%, it will not remain solvent.

What if it cuts 20%. As per the premise, it can still remain solvent.

Hence, B cannot be the correct answer.

Including B, all the options cannot be inferred. There is something wrong with the question.

Please confirm.


Agree with the above reasoning! sayantanc2k , chetan2u . Please confirm

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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 07 Aug 2017, 03:45
TaN1213 wrote:
TaN1213 wrote:
Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.



Edit: I had difficulty in buying the explanation provided for the correct answer. Would like to request Veritas / VeritasPrepkarishma to provide me with an overt explanation.
Explanation provided :
"In an Inference problem, the right answer must be true, meaning that you can use process of elimination to rule out any answers that could be false.

Here A is a prime candidate to be eliminated. You know from the stimulus that Euroquest must cut personnel expenses by 15% in order to remain solvent, but does that mean that if it does so it will definitely remain solvent? Process of elimination for "could be false" includes hypothetical situations: what if Euroquest was hit with a massive lawsuit, or its offices were destroyed by a flood and it couldn't afford to rebuild?

Choice B must be true, and can be proven by what is known in formal logic as the contrapositive. If reducing these expenses by 25% is a necessary requirement for staying solvent, then if the company does not meet that requirement you know that it cannot remain solvent.

Choice C can also be eliminated via a hypothetical situation. Sure, it may be that the competition referenced in the argument is driving costs down, but what if Euroquest is in a resources-starved industry - say its primary ingredient is enriched uranium - and competition is driving up the price of raw materials. That would be consistent with the facts but violate the conclusion, so choice C can be eliminated.

Choices D and E are related to each other, each drawing a conclusion about how Euroquest's competitors are faring with regard to personnel expenses. You cannot draw a conclusion about the competition without any further information about those companies. D may be incorrect because, while Euroquest may need to cut expenses by 15%, its competitors may be so inefficient that they have to cut by 40 or 50%. And E may be incorrect because of the converse: Euroquest is the inefficient one, and everyone else can simply stay the course. You just don't know, so D and E are incorrect. Choice B is the correct answer. "


"You know from the stimulus that Euroquest must cut personnel expenses by 15% in order to remain solvent, but does that mean that if it does so it will definitely remain solvent? Process of elimination for "could be false" includes hypothetical situations: what if Euroquest was hit with a massive lawsuit, or its offices were destroyed by a flood and it couldn't afford to rebuild?"

Not a great explanation. Such outside predicaments could even come even if the reduction in 25% and by no means you can say for sure that it would be able to remain solvent!

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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 07 Aug 2017, 03:59
I dont see OA suitable
Please tell us what's the source of the problem?

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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 08 Aug 2017, 10:25
Vanvic wrote:
I dont see OA suitable
Please tell us what's the source of the problem?

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Hi,

The post is taken from Veritas.

Regards.
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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 09 Aug 2017, 12:36
Official explanation by Veritas prep:
In an Inference problem, the right answer must be true, meaning that you can use process of elimination to rule out any answers that could be false.

Here A is a prime candidate to be eliminated. You know from the stimulus that Euroquest must cut personnel expenses by 15% in order to remain solvent, but does that mean that if it does so it will definitely remain solvent? Process of elimination for "could be false" includes hypothetical situations: what if Euroquest was hit with a massive lawsuit, or its offices were destroyed by a flood and it couldn't afford to rebuild?

Choice B must be true, and can be proven by what is known in formal logic as the contrapositive. If reducing these expenses by 25% is a necessary requirement for staying solvent, then if the company does not meet that requirement you know that it cannot remain solvent.

Choice C can also be eliminated via a hypothetical situation. Sure, it may be that the competition referenced in the argument is driving costs down, but what if Euroquest is in a resources-starved industry - say its primary ingredient is enriched uranium - and competition is driving up the price of raw materials. That would be consistent with the facts but violate the conclusion, so choice C can be eliminated.

Choices D and E are related to each other, each drawing a conclusion about how Euroquest's competitors are faring with regard to personnel expenses. You cannot draw a conclusion about the competition without any further information about those companies. D may be incorrect because, while Euroquest may need to cut expenses by 15%, its competitors may be so inefficient that they have to cut by 40 or 50%. And E may be incorrect because of the converse: Euroquest is the inefficient one, and everyone else can simply stay the course. You just don't know, so D and E are incorrect. Choice B is the correct answer.

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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 16 Aug 2017, 20:52
TaN1213 wrote:
Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.


Guys what the stimulus is basically telling us is that the only way Euroquest can reduce personnel expenditures is by cutting entire divisions and benefits programs- this is the only way to sufficiently reduce personal expenditures; however, in doing so it ends up reducing personal expenditures more then it wants to. There is no other option where Euroquest can manage cuts so as to reduce personnel expenditures by only 15 percent. If Euroquest's only method of reducing personnel expenditures by at least 15 % is a method that causes a 25% reduction then unless they make that reduction they cannot remain solvent.

B

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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 17 Aug 2017, 06:43
TaN1213 wrote:
Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.


abhimahna please help us out with this question.
I am not very convinced with OA. Shouldn't the answer be A? :(
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Because competition has dramatically lowered margins in the industry, [#permalink]

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rekhabishop wrote:
abhimahna please help us out with this question.
I am not very convinced with OA. Shouldn't the answer be A? :(


Okay, I solved this question after a couple of days now and realized my mistake.

The argument is saying two things:

1. To remain solvent, you need to reduce expenditure by atleast 15%.

2. To meet point 1, you need to cut some benefits by 25%.

That means if I donot reduce my benefits by 25%, I wont be able to meet my point 1. If I donot meet my point 1 , I will not be able to remain solvent.

Hence, B is a clear winner here.

rekhabishop , here is the catch. I am saying To do X, I need to Y. But it doesn't mean if I do Y, I will do X as well.

It's like

If P, then Q. But notice that If Q doesn't guarantee P. Hence, A is out without a second thought.

Does that make sense?

P.S: Thanks for tagging me in. I am able to do this question 2nd time very easily. First time, I didnt realize my mistake at all.
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Re: Because competition has dramatically lowered margins in the industry, [#permalink]

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New post 17 Aug 2017, 07:33
abhimahna wrote:
rekhabishop wrote:
abhimahna please help us out with this question.
I am not very convinced with OA. Shouldn't the answer be A? :(


Okay, I solved this question after a couple of days now and realized my mistake.

The argument is saying two things:

1. To remain solvent, you need to reduce expenditure by atleast 15%.

2. To meet point 1, you need to cut some benefits by 25%.

That means if I donot reduce my benefits by 25%, I wont be able to meet my point 1. If I donot meet my point 1 , I will not be able to remain solvent.

Hence, B is a clear winner here.

rekhabishop , here is the catch. I am saying To do X, I need to Y. But it doesn't mean if I do Y, I will do X as well.

It's like

If P, then Q. But notice that If Q doesn't guarantee P. Hence, A is out without a second thought.

Does that make sense?

P.S: Thanks for tagging me in. I am able to do this question 2nd time very easily. First time, I didnt realize my mistake at all.


Thanks a lot, abhimahna . OA makes much more sense, now. :)
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