Holy Faith Broking Company classifies stocks of listed companies on th

Question

Holy Faith Broking Company classifies stocks of listed companies on the basis of two parameters.

Stock Valuation Classification

TOP  – ‘TOP’ is termed as the mean of daily values of “highest percentage increase in the stock price over last day’s closing price” over a period.

BOTTOM  - ‘BOTTOM’ is termed as the mean of daily values of “lowest percentage increase or highest percent decrease, as the case may be, in the stock price over last day’s closing price” over a period.

Stable Cow   - A stock whose TOP is less than 15% and BOTTOM is more than 8%.
  Volatile Bull   - A stock whose TOP is more than 30% and BOTTOM is less than 10%.
  Volatile Bear   - A stock whose TOP is less than 10% and BOTTOM is less than -10%.

Profit Generation Capability

Struggler   - A stock whose issuing company makes a profit between 1% to 5% of its revenue. (Both inclusive)
  Dessert   - A stock whose issuing company makes a loss of more than 1% of its revenue.
  Rain Maker   - A stock whose issuing company makes a profit of more than 10% of its revenue.The two graphs given below are for stocks of companies A, B, C, and D. The first graph shows mean of daily values of “percentage increase or decrease in the stock price over last day’s closing price” over a period. The second graph represents revenue to expense ratio (data label on the bubble) & revenue for these four companies. Centers of bubbles represent revenue of the company (on Y axis).

https://gmatclub.com/blog/wp-content/uploads/2013/02/mSR-12-combo-.png Source: e-GMAT  
  Try worth attempting MSR question- fresh from the e-GMAT bakery!

This question is based on the application of  column charts  that have been widely tested in OG 13 (#25, 28, 31, 32, & 34), and in GMATPrep, while the  bubble chart  is tested in GMATPrep (#13).

Enjoy!

-Shalabh

fameatop · Answer

Hi Shalabh,

Very nice set. Got all the answers correct. Do you really think this question is a good representative of GMAT as I have seen such type of questions appear in consulting cases.

Fame

egmat · Answer

Hi Fame, Thank you for the appreciation, and congratulations to you for getting all the correct answers. Coming to your query, this question is based on the application of column charts that have been widely given in OG 13 (#25, 28, 31, 32, & 34), and GMATPrep, while the bubble chart is tested in GMATPrep (#13). Hope this helps.

Shalabh

thangvietname · Answer

thank you e gmat. 
though this type of question is not very hard, it takes me a lot of time to do

how to reduce the time for this type of question? pls explain.

egmat · Answer

Hi, I understand that MSR questions are a different beast altogether. Think of MSR question like a reading comprehension passage and associated questions. The difference is that in MSR question we have multiple data sets vs. one passage in RC. A typical MSR question asks for handling of multiple data with appropriate reasoning. With the correct application of approach, you can crack this question in stipulated time. In IR test in GMAT, you get on an average 2.5 minutes per question. Since this MSR dataset has 3 associated IR questions, in all you have approximately 7.5 minutes. So based on this, here are my suggestions for timings for this question. 1.Understand the data set- 2 minutes. This is the most important step in MSR question. You need to do a cursory glance at the data set to understand the key characteristics of the same. At this step, you do not need to know in detail each and every piece of information but you should know enough so that when you get to reviewing the questions, you can figure out where the pertinent data resides in the given data set. 2.Q 1- 3 minutes ( Compilation/tabulation of data) –I have not discussed the approach here. I will post a solution to this question soon. You may relate this to comprehend better. 3.Q 2- 1 minute ( It is purely a logic based question. No calculation needed) It can be done in isolation with the help of chart 2 only. 4.Q 3- 1.5 minute (It is an extension of Q1. The work done in Q1, can be reaped here.) Hope this enlightens you.

-Shalabh

egmat · Answer

Here is the solution for this question.

QUESTION 1   
For each of the following statements, select yes if, based on the given information, it must be true, otherwise select no.

a.There are exactly two stocks that cannot be classified per both Stock Valuation and Profit Generation Capability classifications. 
b.Among the four given stocks, the Volatile Bear-Struggler stock will turn to a Volatile Bull-Struggler stock if there is at the most 20 percentage point increment in its TOP. 
c.The expense of the company whose stock is classified as “Rain Maker” is approximately $230 (nearest to $5).

Solution:-

This question needs classification of stocks, so we first read the relevant data from the charts and classify the stocks.
For Stock Valuation Classification (SV Classification), we read the data from chart 1. The data is given below. We find that stock D cannot be classified per any category of SV Classification.

From Chart 1 
 https://gmatclub.com/blog/wp-content/uploads/2013/02/MSR-1.png 
For Profit Generation Capability (PGC) classification, we read the data from chart 2.

The percentage of profit is given as (profit/revenue)*100%.
Let’s take stock A first.

R/E ratio for A is 1.3 or 1.3/1. It means that for a revenue of $1.3, expense is $1, and profit is R-E=1.3-1=0.3. So % profit would be (P/R)*100 = (0.3/1.3)*100% =23.08%. 
Similarly, for other companies, profit percentages are calculated given below.

From Chart 2 
 https://gmatclub.com/blog/wp-content/uploads/2013/02/MSR-2.png 
1. a.There is no stock that is not classified for both the categories. In the SV classification, stock D is not classified, whereas in the PGC classification, stock C is not classified. But both these stocks are classified per at least one of the categories, so the answer is NO.

1. b. B stock is Volatile Bear-Struggler. Let’s look at the criterion of Volatile Bull.

Volatile Bull - A stock whose TOP is more than 30% and BOTTOM is less than 10%.

Presently, TOP of stock B is 9% and BOTTOM is -12%. B only qualifies for the BOTTOM criterion of Volatile Bull. 
To turn it to Volatile Bull, we need to increase its TOP by more than 30% -9% = 21 percentage points. It is more than 20 percent point increment. So the answer is no. No.

1. c.From the table, we know that A stock is the Rain Maker stock. The revenue of the company of stock A is approximately $230, and R/E ratio is 1.3. This gives expenses as 230/1.3 = $176.92. The value is not approximately $230, hence the answer is No.

QUESTION 2   
Select the company pair below whose combined revenue to combined expense ratio is the least?
1. AC, 2.BC, 3. AB, 4. CD

Solution:-

We should be wary of the fact that the question asks for combined revenue to combined expense ratio. We must not simply add their R/E ratios. From chart 2, we get their respective R/E values.

https://gmatclub.com/blog/wp-content/uploads/2013/02/MSR-3.png 
We need not calculate combined revenue and combined expense for each of the options. Logically, R/E ratios for C and D lie in bottom two, hence their combined revenue, and combined expense will also be least. So the answer is CD. The table below shows that combined revenue to combined expense ratio for CD will be the lowest. It lies between 1~0.9.

https://gmatclub.com/blog/wp-content/uploads/2013/02/MSR-4.png 
   QUESTION 3   
For each of the following statements, select yes if, based on the given information, it must be true, otherwise select No.

a. Companies whose stocks are classified as Volatile Bear earn more than 5% profit. 
b. Company that is classified as Volatile Bull is not the company that earns the highest percentage profit.
c. BOTTOM of the company that is classified as Dessert is not the lowest among all stocks.
d. Stock that is classified as Rain Maker is also classified as Stable Cow.

Solution:-

a.From the table above, we find that company B stock is classified as Volatile Bear. It earns 4.76% profit, which is less than 5%. So the answer is No. 
b.From the table above, we find that company A stock is classified as Volatile Bull , and it is indeed the highest percentage profit earner - 23.08%. So the answer is No. 
c.From the table above, we find that company D stock is classified as Dessert . Its BOTTOM value - 7%- is not the lowest among all stocks. The lowest BOTTOM is for stock B (-12%). So the answer is Yes. 
d.From the table above, we find that Rain Maker stock is A, while Stable Cow stock is C. So the answer is No.

If you have any query, please ask.

-Shalabh

zerosleep · Answer

Hi .. I have a doubt... Do we calculate profit percentage based on revenue or expense... you have considered revenue. shouldn't it be expense.. ??

mayankdharwal · Answer

We need to consider both Revenue and expenses: Profit % can be calculated as shown below
Profit % = ((Revenue - Expenses)/Expenses)*100....
As shown in above calculation 
1. Profit = (Revenue - Expenses)
2. Profit % = Profit(Calculated in step #1 divided by expenses and multiplied by 100 i.e. Profit % = (Profit / Expenses) *100.

anirchat · Answer

For Question 1, first statement :

There are exactly two stocks that cannot be classified per both Stock Valuation and Profit Generation Capability classifications. -

Thid is a tad bit confusing.

If A = Stock Valuation abd B = Stock Valuation,

Does the question imply :
1. Cannot be classified by both A and B individually.
2. Cannot be classified by either A and B ?

Holy Faith Broking Company classifies stocks of listed companies on th

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

Yes	No
		There are exactly two stocks that cannot be classified per both Stock Valuation and Profit Generation Capability classifications.
		Among the four given stocks, the Volatile Bear-Struggler stock will turn to a Volatile Bull-Struggler stock if there is at the most 20 percentage point increment in its TOP.
		The expense of the company whose stock is classified as “Rain Maker” is approximately $230 (nearest to $5).

Yes	No
		Companies whose stocks are classified as Volatile Bear earn more than 5% profit.
		Company that is classified as Volatile Bull is not the company that earns the highest percentage profit.
		BOTTOM of the company that is classified as Dessert is not the lowest among all stocks.

GMAT Multi-Source Reasoning (MSR) Questions

Holy Faith Broking Company classifies stocks of listed companies on th

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