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Company Spokesperson: This year, more than 70% of the guests who staye

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Company Spokesperson: This year, more than 70% of the guests who staye  [#permalink]

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New post 17 Aug 2018, 04:36
1
1
00:00
A
B
C
D
E

Difficulty:

  55% (hard)

Question Stats:

63% (01:54) correct 37% (01:58) wrong based on 172 sessions

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Company Spokesperson: This year, more than 70% of the guests who stayed with us over the past summer are planning to return to our resorts for a summer vacation. Therefore, I believe that we are well-positioned for another strong and profitable quarter.

Industry Analyst: This is not necessarily true. Nearly three quarters of the company`s profits come from the attendance of its theme parks located at its major resorts, and it is not certain how this segment will perform this summer.

Which of the following statements, if true, would support the criticism of the Industry Analyst?


A. The company`s management possesses more accurate financial information than is accessible to industry analysts.

B. The industry analyst represents an independent investment firm, which is not affiliated with the company.

C. The company`s revenues and profits have more than doubled over the past 3 years.

D. Because of the seasonality in the vacation travel and theme park attendance, summer is the most important season for the firm`s operations, accounting for over half of the firm's annual profits.

E. The vast majority of guests who visit the company`s resorts attend its theme parks only once, usually during their first week of stay.


Spoiler: :: OFFICIAL EXPLANATION
The company management anticipates strong financial results merely based on the evidence that many of the previous year’s guests are planning to return this summer. The industry analyst disagrees with this projection, claiming that the firm’s profits are largely driven by the attendance of the theme parks and their performance is uncertain. To strengthen the position of the industry analyst, we need to demonstrate that a high rate of returning customers is not necessarily sufficient to yield strong financial results for the company’s theme parks, which account for the vast majority of the firm’s profits.

(A) If the management possesses more accurate financial information, this evidence would weaken rather than strengthen the claim of the industry analyst.

(B) The issue of analyst affiliation is outside the scope of the argument. While the independence of the analyst suggests an unbiased projection, it does not necessarily lead to a more accurate projection. For example, an analyst who is connected to the company may be privy to inside information resulting in a more accurate forecast than one from an independent analyst.

(C) Since both the management and the industry analyst are concerned with the discussion of future rather than historical performance, this statement is outside the scope of the argument. If anything, a strong past record would undermine rather than support the analyst’s claim.

(D) This answer choice demonstrates the importance of summer business for the firm’s operations but provides no information regarding the future outlook, thus neither strengthening nor weakening the argument of the industry analyst.

(E) CORRECT. This answer supports the claim of the industry analyst by demonstrating that the company is unlikely to generate substantial profits from the high number of returning guests. If the vacationers visiting the company’s resorts attend its theme parks only once, the high number of returning customers is unlikely to benefit the firm’s theme parks, which account for the vast majority of the company’s profits.

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Re: Company Spokesperson: This year, more than 70% of the guests who staye  [#permalink]

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New post 17 Aug 2018, 10:02
I thought I had bumped into the Quant section by checking the OP :)

Premise: Company believes that 70% of the guests will return to the resort for summer & analyst believes that they generate more revenue out of theme parks.

Statements a,b & c fall out of scope in explaining so as to why people would not visit theme parks. We are now left with D & E

D suggests that summers are important but do not talk about any quarterly movement in terms or PnL; choice D has thus been knocked out.

Choice E stands.
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Re: Company Spokesperson: This year, more than 70% of the guests who staye &nbs [#permalink] 17 Aug 2018, 10:02
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Company Spokesperson: This year, more than 70% of the guests who staye

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