Financial Advisor: Clearly, Capital Coffee is losing money this year

Question

Financial Advisor: Clearly, Capital Coffee is losing money this year. In just the last six months, Capital Coffee has closed over three dozen stores nationwide, and may even need to close more in the future.

The Advisor's claim rests on which of the following assumptions?

(A) Domestic coffee sales are outperforming international sales.

(B) All of the store closings were made necessary by low sales volume.

(C) Capital Coffee has not opened more than three dozen stores this year.

(D) All major coffee retailers are losing money this year.

(E) None of Capital Coffee's recently-closed stores had turned a profit in the last two years.

The advisor bases his argument that Capital is losing money on the fact that it has closed stores.

Using the Assumption Negation Technique, if C were untrue and Capital had, indeed, opened more than three dozen stores, then the number opened would exceed the number closed, and the evidence would actually be in favor of Capital being more successful.

Answer choice A is out of scope, as even we have no evidence that Capital has a major international business or not.

Choices B and D are each incorrect because they are too absolute; negate either using ANT and the modifier " Not All " does not undermine the conclusion.

Choice E, similarly, is too absolute.

If one of Capital's stores had turned a profit (instead of none), the company could still be losing money this year.

dinesh86 · Accepted Answer

Financial Advisor: Clearly, Capital Coffee is losing money this year. In just the last six months, Capital Coffee has closed over three dozen stores nationwide, and may even need to close more in the future.

The advisor's claim rests on which of the following assumptions?

FA: Losing of money ---> Closing of stores.  
Conc.: more stores will be closed in future.

a) Domestic coffee sales are outperforming international sales - OFS

b) All of the store closings were made necessary by low sales volume - It is Shell answer. Someone says that Low sales volume lead to losing of money which further lead to closing of stores. But, there is difference between low sales volume and losing of money. At one time it may be correct but at other time it may be wrong for e.g. company may still be losing money even when sales would be high and overheads expenses (such as premise rent, staff salary, statutory expenses etc.) also would be high.

c) Capital Coffee has not opened more than three dozen stores this year - Correct. Because those three dozen stores may have been shut down not due to money-losing but due to some other reasons say legal conflict, political issues, natural calamity etc. And simultaneously, CC opened more than three dozens stores at other places.

d) All major coffee retailers are losing money this year - OFS

e) None of Capital Coffee's recently-closed stores had turned a profit in the last two years - Profits are not mentioned in passage

amatya · Answer

In this question we need to first observe that what option E is telling us option E says e) None of Capital Coffee's recently-closed stores had turned a profit in the last two years. Since in this question we have to find the assumption which bridges the gap between premise( In just the last six months, Capital Coffee has closed over three dozen stores nationwide, and may even need to close more in the future.) and conclusion (Clearly, Capital Coffee is losing money this year).Option E shows the information about which we dont know because its saying from past 2 years they had not turned into profit which is completely out of scope of the argument,the argument does not mentioned anything about it . For option C which says that c) Capital Coffee has not opened more than three dozen stores this year. Now to understand this we need to have clear understanding of what premise is telling and what conclusion is telling.Premise is saying that " Capital Coffee has closed over three dozen stores nationwide, and may even need to close more in the future." where as conclusion is saying "Clearly, Capital Coffee is losing money this year" if we do some prethinking we can assume that since capital coffee is closing more and more branches therefore it is loosing its money which in other words can say that number of stores opened this year were less than the number of stores closed and option C tells us that only Don't forget to give kudos

Temurkhon · Answer

Supporter assumption:  Closing dozen stores in 6 months is indicator of losing money in year

Defender assumption:  No factors that could stop losing money by the end of year exist

C  fits defender

nitinagg29 · Answer

I think answer should be E, As we are talking about " Capital Coffee is losing money this year " and E is talking about no profit and if we negate also then its weaken the author's claim.

Success2015 · Answer

Assumption plugs the gap between the premise and the logical jump made in the conclusion.
With this is mind, I used the following reasoning to eliminate B.

Evidence - Capital Coffee has closed over three dozen stores nationwide
 **GAP**closure need not indicate loss of money**it may be a strategy** 
Conclusion - Capital Coffee is losing money this year

Evidence - Capital Coffee has closed over three dozen stores nationwide
 **store closings were due to low sales volume**    but what if profit was high?  
Conclusion - Capital Coffee is losing money this year

hence the gap is still not closed. Low sales volume may not mean lower profits...Profit could have been HIGH.
So the conclusion that Capital Coffee is losing money is still doubtful.

I used the following reasoning to eliminate E.
option E - None of Capital Coffee's recently-closed stores had turned a profit  in the last two years .
If none were making profit, then the conclusion "Capital Coffee  is losing money this year ."
is not correct.
So this option does not fill the gap.

hope this is correct. Experts pls comment.

KarishmaB · Answer

Yes, correct.

The argument says that CC has closed many stores. The implication is that CC is losing money this year. There are many assumptions here. Any of the below could lead to more money inspite of closing 3 dozen stores.
CC has opened more than 3 dozen new stores. 
CC's flagship stores which are running are suddenly doing a lot of extra business and hence the manpower has been diverted (i.e. some strategy based closure)

So (C) is the correct answer.

Issues with B - The use of the word "All". It is not necessary that all store closings were because of low sales. Even if most were because of low sales, CC could be losing money. Also, "low sales volume" and "low sales" are different. Low sales volume may not make a store close if profitability is still quite high.

Issues with (E) - The use of the word "None". It is possible that 1 or 2 were returning profits but their prospects were weak and hence the stores were closed. Also, two years is way too specific. We are not assuming that there was no profit for 2 years. A store could be closed even if it made no profit in one year or even if it did make profit.

sharma123 · Answer

Can we use negation in this question, if yes then kindly explain

mvictor · Answer

i usually don't like assumptions type of questions, but this one seemed pretty easy...
identified 2 possible assumptions:
1. closure of the three dozen ones was not the result of a plan to extend the operations in the existing, opened stores. what if the company decided to concentrate in a specific region only, where the sales are so high that the losses from closure of the 36 ones is not felt at all?
2. CC did not open in the same year >36 stores. what if CC closed 36 stores because it decided to relocate them? m?

The advisor's claim rests on which of the following assumptions?

a) Domestic coffee sales are outperforming international sales.
outside of the scope

b) All of the store closings were made necessary by low sales volume.
irrelevant

c) Capital Coffee has not opened more than three dozen stores this year.
bingo!

d) All major coffee retailers are losing money this year.
what others are doing is not our concern.

e) None of Capital Coffee's recently-closed stores had turned a profit in the last two years.
irrelevant.

mvictor · Answer

yes, negation test can be used here, but it is recommended to use it after we eliminate at least 2-3 incorrect answer choices.

suppose we are left with C and E.

negate C:
CC opened more than 36 stores. CC closed ~36 stores. 
let's say opened 40, closed 38. we have in total +2 stores. +2 stores => more $. so conclusion is not validated in this case.

negate E:
Some stores made profit - some might be 1 or might be all...what if out of 38, only 1 made profit, and 37 not? well...CC lost money
what if all 38 made profit, but all 38 were closed? CC did not lose money. 
2 possible outcomes - can't be the right answer.

Crytiocanalyst · Answer

The Advisor's claim rests on which of the following assumptions?

(A) Domestic coffee sales are outperforming international sales.
This is thoroughly out of context and doesn't impact the passage the slightest

(B) All of the store closings were made necessary by low sales volume.
There may be other reasons we just know about the same therefore out

(C) Capital Coffee has not opened more than three dozen stores this year.
If it has to close 3 dozen plus stores , the above action can only be implemented if that many stores existed therefore our option

(D) All major coffee retailers are losing money this year.
This might and might not be the case therefore out

(E) None of Capital Coffee's recently-closed stores had turned a profit in the last two years.
It might have turned profitable but individually it might be otherwise

Shuvojoti · Answer

Can anyone explain how to use the "negate technique" in critical reasoning?

Stanindaw · Answer

Please check my understanding:

Since it is an assumption question we need an answer which must be true in every scenario. Therefore, it must break the conclusion in every scenario. 
Here the basis for the conclusion is that "Capital Coffee has closed over three dozen stores nationwide, and may even need to close more in the future."

So option C is valid only until CC has not opened a number of stores which is less than the number of stores closed by it. Because if the number is less then the negation of C will not break the conclusion.

BinodBhai · Answer

The financial advisor claims that Capital Coffee is losing money this year, and their evidence is the closure of over three dozen stores. However, for this reasoning to hold, they must assume that closing stores is a sign of financial trouble rather than just normal business restructuring.

Now, why is (C) the correct assumption? Because if Capital Coffee had opened a large number of new stores in the same time period—say, more than three dozen—then their overall store count wouldn't necessarily be decreasing. In such a case, closures wouldn't directly indicate financial trouble; they could simply be a reallocation of resources, with some stores shutting down while others are opening.

So, for the advisor’s argument to be valid, they must assume that Capital Coffee has not opened more than three dozen stores this year—otherwise, the claim that they are losing money wouldn't logically follow from store closures alone.

This assumption ensures that the total number of stores is decreasing, reinforcing the idea that the company is struggling financially.

bestreturn · Answer

I find negation technique confuses me in some questions like this question

Negating choice C.
(C) Capital Coffee has opened more than three dozen stores this year.

So they have opened >36 stores this year, and in last 6 months they close 36 stores... I'm not sure how does it destroy conclusion that they are losing money. When I negate, it seems to me that they opened >36 stores and 36 of them were closed.. doesn't mean that the remaining store are making money considering that they may need to close more in the future. Moreover, FA think CC will lose money despite closure meaning the remaining stores are probably losing money as well so all the more reason to believe that remaining stores are losing money

Should the strategy rather be that negating choice may not need to clearly destroy the conclusion but give some indication or with some assumption that it can be destroyed?

Financial Advisor: Clearly, Capital Coffee is losing money this year

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Financial Advisor: Clearly, Capital Coffee is losing money this year

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