Events & Promotions
|
|
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.
Customized
for You
Track
Your Progress
Practice
Pays
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Nov 2007:30 AM PST
-08:30 AM PST
Learn what truly sets the UC Riverside MBA apart and how it helps in your professional growth
Nov 2211:00 AM IST
-01:00 PM IST
Do RC/MSR passages scare you? e-GMAT is conducting a masterclass to help you learn – Learn effective reading strategies Tackle difficult RC & MSR with confidence Excel in timed test environment- Nov 23
11:00 AM IST
-01:00 PM IST
Attend this free GMAT Algebra Webinar and learn how to master the most challenging Inequalities and Absolute Value problems with ease. 
Nov 2510:00 AM EST
-11:00 AM EST
Prefer video-based learning? The Target Test Prep OnDemand course is a one-of-a-kind video masterclass featuring 400 hours of lecture-style teaching by Scott Woodbury-Stewart, founder of Target Test Prep and one of the most accomplished GMAT instructors.
27 Sep 2017, 23:41
Kudos
Bookmarks
A
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
95%
(hard)
Question Stats:
40% (02:29) correct
60%
(02:26)
wrong
based on 708
sessions
History
Date
Time
Result
Not Attempted Yet
Five years ago, McDonald’s made a big mistake by selling off its Chipotle stake to refocus on its core products. Today Chipotle has a market cap of $9 billion (10 percent that of McDonald’s) and the revenue growth it generated during these five years would have more than doubled McDonald’s total revenue growth.
If the information given above is true, which of the following must be true?
A. If the ratio of revenue to market cap for McDonald’s has remained equal to that of Chipotle in the last five years, then Chipotle has grown at a significantly faster rate than McDonald’s.
B.. Chipotle’s current revenues must be less than the current revenues of McDonald’s.
C. If market cap is directly proportional to the revenue of a company, then Chipotle must have more than doubled its market cap in the last five years.
D. The ratio of revenue to market cap for McDonald’s is significantly lower than that for Chipotle.
E. If both Chipotle and McDonald’s continue to grow at the same pace, then Chipotle will have greater revenues than McDonald’s within the next 10 years.
If the information given above is true, which of the following must be true?
A. If the ratio of revenue to market cap for McDonald’s has remained equal to that of Chipotle in the last five years, then Chipotle has grown at a significantly faster rate than McDonald’s.
B.. Chipotle’s current revenues must be less than the current revenues of McDonald’s.
C. If market cap is directly proportional to the revenue of a company, then Chipotle must have more than doubled its market cap in the last five years.
D. The ratio of revenue to market cap for McDonald’s is significantly lower than that for Chipotle.
E. If both Chipotle and McDonald’s continue to grow at the same pace, then Chipotle will have greater revenues than McDonald’s within the next 10 years.
29 Sep 2017, 19:55
Kudos
Bookmarks
fmik7894
The most important point revenue Vs market cap.
Revenue is what a company earns through sales and other means WHILE market cap is the total worth of the company.
So both mean different
Let's see what each statement tells us:-
a. If the ratio of revenue to market cap for McDonald’s has remained equal to that of Chipotle in the last five years, then Chipotle has grown at a significantly faster rate than McDonald’s.
Now let the \(\frac{r_m}{m_m}=\frac{r_c}{m_c}=\frac{1}{10}\). So if the revenue has increased two times for MacDonald, the market cap would become 2*10=20. But we know that the revenue growth of Chipotle is much higher and would have even made the revenue growth of MacDonald more than double. So for chipotle too the revenue growth must have been (twice )*2 or 4 times , thus making the market cap also 4 times. Hence the statement is CORRECT
b. Chipotle’s current revenues must be less than the current revenues of McDonald’s.
we know the revenue growth is more but nothing about REVENUE.
c. If market cap is directly proportional to the revenue of a company, then Chipotle must have more than doubled its market cap in the last five years.
we have no info on the growth value, we just know the relationship between the revenue growth of two companies.
d. The ratio of revenue to market cap for McDonald’s is significantly lower than that for Chipotle.
Again, nothing is given in para to suggest that.
e. If both Chipotle and McDonald’s continue to grow at the same pace, then Chipotle will have greater revenues than McDonald’s within the next 10 years.
We don't know the exact values of revenue or growth or market cap to suggest this.
A
29 Sep 2017, 20:19
Kudos
Bookmarks
chetan2u
Hello chetan2u,
Thank you for the explanation.
I would like to present my understanding of Option C.
From the premise we know that "the revenue growth Chipotle generated during these five years would have more than doubled McDonald’s total revenue growth"
Now, this is a hypothetical situation, which says that had McDonalds not sold off Chipotle, Chipotle would have more than doubled the former's revenue.
Now for this to be true, Chipotle itself must have doubled its revenue.
Option C says that market cap is directly proportional to revenue.
While I know that the absolute value of revenue is not mentioned, we know Chipotle must have doubled its own revenue
Hence, market cap of Chipotle must also have been doubled during the 5 yrs period.
