Because most investors prefer long-term capital gains to annual divide

Because most investors prefer long-term capital gains to annual dividend payouts, the reduction in dividend payout ratios that have taken place during the last decade are perfectly understandable.


(A) the reduction in dividend payout ratios that have taken place during the last decade are
the reduction is singular hence we need the verb "is" and not "are"

(B) the reduction in dividend payout ratios that has taken place during the last decade is
ratios is plural and hence we need the verb "have" and not "has"

(C) the reduction that has taken place in dividend payout ratios during the last decade are
Same as option A

(D) the reduction in dividend payout ratios that have taken place during the last decade is
Gramatically correct. Only issue is that the meaning is wrong. The intended emphasis is on the reduction that has taken place during the last decade and not on the dividend payout ratios that have taken place during the last decade.

(E) the reduction that has taken place in dividend payout ratios during the last decade is
Correct option.

(A) Because most investors prefer long-term capital gains to annual dividend payouts, the reduction in dividend payout ratios that have taken place during the last decade are perfectly understandable. -> "are" is used for "the reduction". The correct verb for "the reduction" is "is" because "the reduction" is singular

(B) Because most investors prefer long-term capital gains to annual dividend payouts, the reduction in dividend payout ratios that has taken place during the last decade is perfectly understandable. -> This option can be interpreted in two ways -
1. the reduction in dividend payout ratios that has taken place
2. the reduction in dividend payout ratios that has taken place
This answer choice can be discarded for the ambiguity

(C) Because most investors prefer long-term capital gains to annual dividend payouts, the reduction that has taken place in dividend payout ratios during the last decade are perfectly understandable. -> Same explanation as in option (A)

(D) Because most investors prefer long-term capital gains to annual dividend payouts, the reduction in dividend payout ratios that have taken place during the last decade is perfectly understandable. -> This option changes the intended meaning. This option suggests that the dividend payout ratios have taken place during the last decade. This is, however, not the intended meaning. It's the "reduction" that has taken place during the last decade

(E) Because most investors prefer long-term capital gains to annual dividend payouts, the reduction that has taken place in dividend payout ratios during the last decade is perfectly understandable. -> Correct! This option clearly indicates that the reduction has taken place during the last decade

Bunuel
Why is B wrong? I am unable to eliminate B vs E.

"the reduction" is singular and requires the singular verb "is", and not the plural verb "are".
This is the main difference between options B and E.

TargetKellogg2024 wrote:

Karan0912 wrote:

Bunuel
Why is B wrong? I am unable to eliminate B vs E.

"the reduction" is singular and requires the singular verb "is", and not the plural verb "are".
This is the main difference between options B and E.

But there is no 'are' in option B, only difference between E & B is the sentence structure

Where do you see ARE in Option B??

In option B the "that" refers to "dividend payout ratios". Therefore we need the plural verb "have" rather than "has". Option E has no such issues since "that" refers to "the reduction".

Oh, my bad!
Responded to another question here.

Well, here's the reason why (E) trumps over (B) :
The main difference between (B) and (E) is in the meaning, and this is one concept of modifier/meaning that I have seen in a couple of other official questions as well.
So, let's see the whole sentence as per choice (B)-
Because most investors prefer long-term capital gains to annual dividend payouts, the reduction in dividend payout ratios that has taken place during the last decade is perfectly understandable.

Now, let's analyze the sentence-
Because most investors prefer long-term capital gains to annual dividend payouts, --> this part of the sentence sounds okay!
the reduction in dividend payout ratios that has taken place during the last decade is perfectly understandable. --> Ummm...at first, this seems a perfectly fine answer choice. But, there's a very subtle problem in the meaning of the sentence because of the placement of the modifier "during the last year". Based upon how we read the sentence, there could be two very different meanings. Let's see how-
>> the reduction in dividend payout ratios that has taken place during the last decade is perfectly understandable. --> Just read the bold part of the sentence and you'll notice that it makes perfect sense. It is the reduction that has taken place during the last decade.
>> the reduction in dividend payout ratios that has taken place during the last decade is perfectly understandable. --> Well, one can argue that the bold sentence does not make any sense - How could "dividend payout ratios" "take place"? Well, that's completely understandable and even though there is a slight ambiguity because of the placement of the modifier "has taken place", there's nothing absolutely wrong with this sentence. We can keep this for now.

Now, moving on to the whole sentence as per choice (E)-
Because most investors prefer long-term capital gains to annual dividend payouts, the reduction that has taken place in dividend payout ratios during the last decade is perfectly understandable.

Let's analyze this sentence-
Because most investors prefer long-term capital gains to annual dividend payouts, --> this part of the sentence sounds okay!
the reduction that has taken place in dividend payout ratios during the last decade is perfectly understandable. --> In this answer choice, the ambiguity discussed in answer choice (B) is rectified and from this option, it is very clear that it is "the reduction" that "has taken place" and not the "dividend payout ratios". Therefore, this answer choice is preferred over answer choice (B)

Tip: If you see any similar answer choices ever, pick up the answer choice where the modifier is closest to the entity it is modifying. In this case, "has taken place" is closer to "the reduction" in answer choice (E) than in answer choice (B). Use this logic to answer below (official) question -
https://gmatclub.com/forum/some-buildin ... 64808.html

Please note that in GMAT SC, our objective is not to identify the perfectly correct answer choice, but to pick the best of the given five answer choices. Many a times, an SC question can have multiple correct answers, but we need to identify one that "fits" the best!

IMO the question is flawed.
Sure, "that" is a restrictive pronoun. But the usage of "is" right after "that" signals (in my opinion in a sufficient way) that "that" refers to "the reduction [in dividend payout ratios]".
An expert reply would be cool here!

Definitely, we cannot rule out the possibility of this question not being on the same level as any official question. But, to choose the correct option between B and E, we could proceed (or at least, I proceeded) as below -
The only difference in options B & E is the placement of the "phrases". Let's chalk down the phrases in both the sentences -
1. the reduction...is
2. in dividend payout ratios
3. that has taken place
4. during the last decade

Option B goes as 1 > 2 > 3 > 4
Option E goes as 1 > 3 > 2 > 4

Now, we can see that the only difference is in the placement of the phrase "that has taken place". Should it be before 2 or after 2?
Well, "that has taken place" is modifying "the reduction". Therefore, 3 should be closer to 1.
In other words, the correct sequence should be 1 > 3 > 2 > 4

Note: There is an official question that can be solved using the same logic. This question can be accessed via https://gmatclub.com/forum/some-buildin ... 64808.html

Hello prfs11,

We hope this finds you well.

To clarify, Option B is inferior to Option E, in that it is slightly less direct.

However, this difference is very slight, and you are unlikely to encounter a question on the GMAT that relies on such fine details to eliminate an answer choice.

We hope this helps.
All the best!
Experts' Global Team

Official Explanation:

Answer: E

(A) The singular subject reduction does not agree with the plural verbs have and are.

(B) While this sentence looks correct, there is a slight ambiguity in meaning. Ideally that should restrict reduction and not ratios. Also, this sentence incorrectly suggests that ratios have taken place in the last decade.

(C) The singular subject reduction does not agree with the plural verb are.

(D) Same as B. Also, the singular subject reduction does not agree with the plural verb have.

(E) The correct answer. Correctly uses that to modify reduction. Also, uses the singular verb is to agree with the singular subject reduction.

Hi GMAT gangs,

I understand the flaw in B option, but if we change a bit by adding (comma) to:

the reduction in dividend payout ratios, that has taken place during the last decade, is

will it be a correct one as well?

Hi blablabla1997,

The sentence that you have provided - the reduction in dividend payout ratios, that has taken place during the last decade, is is incorrect for two reasons:
1. "comma + that" is almost never used - Either use "that" without a comma, or use "comma + which". It depends upon the meaning that we want to convey. THAT is used when we want to provide essential information about the subject, and if this information is excluded from the sentence, the sentence doesn't make sense. Whereas, WHICH is used to add additional information about the subject, and if this information is excluded from the sentence, the sentence would still make sense. Here's an example how -
[*] The car that has 5500 cc engine is one of the best in the market
If you remove THAT, you will have the remaining sentence as The car that has 5500 cc engine is one of the best in the market - Which car is one of the best in the market? The meaning of the sentence is changed!

[*] The car, which is black in color, is manufactured by Viking Cars
Here, removing WHICH doesn't make the sentence senseless

PS - In a "comm + which" sentence, "WHICH" always modifies the noun right before the comma.

2. Let's say we ignore the issue mentioned in point 1, still we have a huge problem with the sentence. As explained in point 1, there are cases when we need to identify the "essential" and "Additional" information about the subject, and while the essential information can not be removed from the sentence, the additional information can be removed.
In this case, the information provided between two commas seems to be additional information, which when removed should not alter the meaning of the sentence. However, that is not the case. Hence, the sentence can be deemed incorrect