Bonuses at DSR Industries cannot be awarded unless profits exceed

Question

Bonuses at DSR Industries cannot be awarded unless profits exceed a ten percent return on stockholders’ investments in the company. Higher profits mean higher bonuses. Therefore, bonuses in a year of general economic recession will be considerably lower than bonuses in a year of peak profits at DSR.

The conclusion above depends on the assumption that

The conclusion above depends on the assumption that

(A) the firm will have relatively low profits in recession years

(B) the amount represented by a ten percent return on stockholders’ investments in the company will increase from year to year

(C) profits rarely exceed a ten percent return on stockholders’ investments in the company

(D) profits in excess of a ten percent return on stockholders’ investments in the company are all distributed in the form of bonuses

(E) bonuses at DSR never drop to zero

DinoPen · Accepted Answer

The argument is the following: 
If it is a recession, bonuses will be low.
(The converse): 
If it is a peak, bonuses will be high.

If you negate this: "The firm will have high profits in recession", you weaken the argument  
 
 This does not consider the recessions and booms of the company. Thus, this is irrelevant  
 
 This does not provide any insight on when or why profits rarely exceed ten percent of stockholders' investments -- not a required assumption 
 
 This provides no insight as to the difference of awarded bonuses in peak or recession  
 
 Same as my reasoning for D.

debjit1990 · Answer

Ans: A
A)the firm will have relatively low profits in recession years.

This explains why bonus is in recession year.

ayushgee · Answer

Shouldn't the assumption be : "Profits at DSR always exceed a ten percent return on stockholders’ investments in the company?"

guddo · Answer

Bonuses at DSR Industries cannot be awarded unless profits exceed a ten percent return on stockholders’ investments in the company. Higher profits mean higher bonuses. Therefore, bonuses in a year of general economic recession will be considerably lower than bonuses in a year of peak profits at DSR. 
 
The conclusion above depends on the assumption that

The argument says bonuses depend on profits, then concludes that bonuses during a recession will be much lower than bonuses during a peak-profit year.  The missing link  is that DSR’s profits are actually lower during recession years. Without that, we cannot infer that bonuses would be lower  just because the overall economy is in recession .

(A) the firm will have relatively low profits in recession years

Correct. If DSR does not have relatively low profits during recession years, then there is no reason to conclude that bonuses will be considerably lower in those years than in peak-profit years.

(B) the amount represented by a ten percent return on stockholders’ investments in the company will increase from year to year

Wrong. The argument does not depend on the threshold increasing.

(C) profits rarely exceed a ten percent return on stockholders’ investments in the company

Wrong. The argument is about recession years versus peak-profit years, not how often profits exceed the bonus threshold.

(D) profits in excess of a ten percent return on stockholders’ investments in the company are all distributed in the form of bonuses

Wrong. The argument only says higher profits mean higher bonuses, not that all excess profits become bonuses.

(E) bonuses at DSR never drop to zero

Wrong. The conclusion could still hold even if bonuses dropped to zero in recession years.

Answer: (A)

Bonuses at DSR Industries cannot be awarded unless profits exceed

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

Bonuses at DSR Industries cannot be awarded unless profits exceed

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards