Financial formulas for valuing companies do not apply to Internet comp

Question

Financial formulas for valuing companies do not apply to Internet companies in the same way as they do to traditional businesses, because they are growing and seldom have ascertainable sales and cash flows.

A. Financial formulas for valuing companies do not apply to Internet companies in the same way as they do to traditional businesses, because they are growing and seldom have ascertainable sales and cash flows.

B. Internet companies are not subject to the same applicability of financial formulas for valuing these companies as compared with traditional businesses, because they are growing and seldom have ascertainable sales and cash flows.

C. Because they are growing and seldom have ascertainable sales and cash flows, financial formulas for valuing companies do not apply to Internet companies in the same way as they do to traditional businesses.

D. Because they are growing and seldom have ascertainable sales and cash flows, Internet companies are not subject to the same applicability of financial valuation formulas as are traditional businesses.

E. Because Internet companies are growing and seldom have ascertainable sales and cash flows, financial formulas for valuing these companies do not apply to them in the same way as to traditional businesses.

source - Ace the gmat

alexkozhura · Answer

A  and  B  are out because of problems with the pronoun "they", which doesn't have a clear antecedent.

In  C , formulas are growing, and not internet companies. Wrong.

We are left with D and E.  D  has that extremely awkward "Internet companies  are not subject to the same applicability of financial valuation formulas ".

E  is the best option.

kumarclub · Answer

In option A "they" is ambiguous

In option B and D "the same applicability of financial formulas" sounds awkward

In option C ... comma subject error.... after comma internet companies should come because companies have sales and cash flows...not formulas.

So option E is correct.

aragonn · Answer

Official Explanation:

Choice E 
Classification: Pronoun Usage 
Snapshot: This problem is included to highlight ambiguity arising from the use of personal pronouns, and seeks to clear up such ambiguity, not by replacing pronouns, but by rearranging the sentence itself. Part of the reason it garners a three-chili rating is because the problem is long, and somewhat difficult to read and analyze in two minutes—the standard time allotted for completing any and all multiple-choice GMAT problems. 
Choices A and B use the word “they” to refer to traditional businesses; this is illogical because traditional businesses are not growing, Internet companies are. Remember that a pronoun modifies the closest noun that precedes it. The structure in choice C makes it seem as if “financial formulas” are growing, and this, of course, is farcical. 
Choices A and C use the awkward clause “do not apply to X in the same way as they do to Y.” A more succinct rendition is found in choice E—“do not apply to X in the same way as to Y.” In choices A, C, and E, the verb “apply” is more powerful and, therefore, superior to the noun form “applicability,” which appears in choices B and D. 
NOTE Beware of the high school wise tale that says you shouldn’t begin a sentence with the word “because.” If you learned this as a rule, forget it. According to the conventions of Standard Written English (SWE)—which, incidentally, this book abides by—the word “because” functions as a subordinating conjunction. Its use is effectively identical to that of “as” or “since,” and we can think of these three words as substitutes. In short, there’s actually no rule of grammar or style preventing us from beginning a sentence with the word “because.”

BARUAH · Answer

Financial formulas for valuing companies do not apply to Internet companies in the same way as they do to traditional businesses, because they are growing and seldom have ascertainable sales and cash flows.

A. Financial formulas for valuing companies do not apply to Internet companies in the same way as they do to traditional businesses, because  they  are growing and seldom have ascertainable sales and cash flows. :They : Its antecedent is not clear( traditional businesses or internet companies)

B. Internet companies are not subject to the same  applicability  of financial formulas for valuing these companies as compared with traditional businesses, because  they  are growing and seldom have ascertainable sales and cash flows. : GMAT prefers action verbs (i.e apply) to nouns (i.e. applicability). They : Its antecedent is not clear( traditional businesses or internet companies)

C. Because  they  are growing and seldom have ascertainable sales and cash flows, financial formulas for valuing companies do not apply to Internet companies in the same way as they do to traditional businesses. : They ,here, refers to financial formula which is the subject of the independent clause. Financial formulas can't grow.

D. Because they are growing and seldom have ascertainable sales and cash flows, Internet companies are not subject to the same  applicability  of financial valuation formulas as are traditional businesses. : Same error as in B

E. Because Internet companies are growing and seldom have ascertainable sales and cash flows, financial formulas for valuing these companies do not apply to them in the same way as to traditional businesses. Correct

_shashank_shekhar_ · Answer

Ans - (E) Because  Internet companies  are growing and seldom have ascertainable sales and cash flows, financial formulas for valuing  these  companies do not apply to them in the same way as to traditional businesses.

Prateek176 · Answer

daagh  ,  MartyMurray

What is wrong with use of "applicability" in option D. I am not fully clear

MartyTargetTestPrep · Answer

D. Because they are growing and seldom have ascertainable sales and cash flows, Internet companies are not subject to the same applicability of financial valuation formulas as are traditional businesses.

In this context, "applicability" is simply the wrong word, and the official sounding clause "Internet companies are not subject to the same applicability" does not express a meaning that makes any sense.

Consider the meaning of "applicability." It means "degree of usefulness of something for a particular task."

Here it is used correctly in a sentence:

The applicability of common financial formulas in valuing Internet companies is questionable.

or

The degree of usefulness of common financial formulas in valuing Internet companies is questionable.

Consider the meaning of "subject to." It means something along the lines of "affected by" or "forced to experience."

Here is is used correctly in a sentence:

People traveling by air may be subject to various hassles associated with security measures.
 
or

People traveling by air may be forced to experience various hassles associated with security measures.

Let's substitute these definitions into (D).

D. (Edited) Because they are growing and seldom have ascertainable sales and cash flows, Internet companies are not forced to experience the same degree of usefulness of financial valuation formulas as are traditional businesses.

Complete nonsense.

energetics · Answer

MartyTargetTestPrep 
Thank you for the explanation. I chose D over E on the basis of D having the antecedent in the independent clause. Is this wrong to do? (Also, in my head E sounded better when I moved the subordinating conjunctions to the end of each sentence).

MartyTargetTestPrep · Answer

As long as a sentence is not clearly grammatically incorrect and effectively conveys its meaning, it's correct.

There is so much flexibility in how sentences can be constructed. Clauses and words can be correctly and logically ordered in multiple ways. Tenses can be used in many ways.

It appears that you are making up rules that don't exist.

There are usually very clear reasons why one SC choice is better than another. If you see them, you won't wonder whether some insignificant difference actually means something.

AjiteshArun · Answer

It's okay to start a sentence with a subordinating conjunction, and a lot of official questions do just that. Just remember to check whether the sentence has an independent clause. That'll take care of a relatively common error that the GMAT slips into options with subordinating conjunctions.

Also, if it helps, you can try  the official question  that this question is based on.

gmattodreamschool · Answer

@MartyMurray

Because  Internet companies  are growing and seldom have ascertainable sales and cash flows, financial formulas for valuing  these companies  do not apply to  them  in the same way as to traditional businesses.

it seemed very odd when i replaced the pronoun with the antecedent

--> financial formulas  for valuing internet companies    do not apply to internet companies   as to traditional businesses

the true meaning is : financial formulas used for evaluating traditional business do not apply to internet companies 
but the meaning obtained from E: financial formulas for internet companies do not apply to internet companies

thus i felt there was a mismatch of pronoun with its antecedent.

MartyTargetTestPrep · Answer

Hmm. Interesting. The meaning is a little off, BUT not as far off as what you said seems to indicate.

What you said: financial formulas for internet companies  do not apply  to internet companies

What the sentence actually says: financial formulas for valuing   companies do not apply to    in the same way  as to traditional businesses

The presence of "in the same way" renders the sentence almost logical.

Of course it would be better as the following: financial formulas   used   for valuing   companies do not apply to    in the same way  as to traditional businesses

VerbalBot · Answer

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Financial formulas for valuing companies do not apply to Internet comp

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