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25 Jul 2017, 11:58
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In the United States profits from sales of Grainco’s biggest selling product, cornflakes, have dropped by 30 percent over the last 3 years. During this same time the value of a share of Grainco stock rose by over 20 percent. This is puzzling because the value of a stock usually decreases when a company’s sales decrease.
Which of the following, if true during the last 3 years, most helps to explain why the value of a share of Grainco stock moved in the way that it did?
(A) Severe drought in the Midwest destroyed a large percentage of the corn crop, forcing Grainco to buy less corn.
(B) Grainco closed a food processing plant in a locality that offered cheap labor and low taxes.
(C) Profits from sales of Grainco oatmeal, which account for a large part of Grainco’s total sales and profits, increased dramatically in both the foreign and domestic markets.
(D) Grainco employees formed a union that helped them get higher salaries and increased medical benefits.
(E) Several articles in prominent business publications listed Grainco as a company that has poor management.
Which of the following, if true during the last 3 years, most helps to explain why the value of a share of Grainco stock moved in the way that it did?
(A) Severe drought in the Midwest destroyed a large percentage of the corn crop, forcing Grainco to buy less corn.
(B) Grainco closed a food processing plant in a locality that offered cheap labor and low taxes.
(C) Profits from sales of Grainco oatmeal, which account for a large part of Grainco’s total sales and profits, increased dramatically in both the foreign and domestic markets.
(D) Grainco employees formed a union that helped them get higher salaries and increased medical benefits.
(E) Several articles in prominent business publications listed Grainco as a company that has poor management.
25 Jul 2017, 12:11
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mihir0710
In the United States profits from sales of Grainco’s biggest selling product, cornflakes, have dropped by 30 percent over the last 3 years. During this same time the value of a share of Grainco stock rose by over 20 percent. This is puzzling because the value of a stock usually decreases when a company’s sales decrease.
Which of the following, if true during the last 3 years, most helps to explain why the value of a share of Grainco stock moved in the way that it did?
(A) Severe drought in the Midwest destroyed a large percentage of the corn crop, forcing Grainco to buy less corn.
(B) Grainco closed a food processing plant in a locality that offered cheap labor and low taxes.
(C) Profits from sales of Grainco oatmeal, which account for a large part of Grainco’s total sales and profits, increased dramatically in both the foreign and domestic markets.
(D) Grainco employees formed a union that helped them get higher salaries and increased medical benefits.
(E) Several articles in prominent business publications listed Grainco as a company that has poor management.
Which of the following, if true during the last 3 years, most helps to explain why the value of a share of Grainco stock moved in the way that it did?
(A) Severe drought in the Midwest destroyed a large percentage of the corn crop, forcing Grainco to buy less corn.
(B) Grainco closed a food processing plant in a locality that offered cheap labor and low taxes.
(C) Profits from sales of Grainco oatmeal, which account for a large part of Grainco’s total sales and profits, increased dramatically in both the foreign and domestic markets.
(D) Grainco employees formed a union that helped them get higher salaries and increased medical benefits.
(E) Several articles in prominent business publications listed Grainco as a company that has poor management.
Sales down, but Stock Prices are up!
This will happen only if sales are down for a product that don't contribute a large percentage to the companies revenues + another product has had tremendous growth keeping the markets happy.
A - Doesn't help the paradox i.e. drop in sales but an increase in stock price.
B - This would have an adverse effect on production, which might explain some part of the sales drop, but it still doesn't explain why the stocks went up.
C - Oatmeals increased dramatically. This is it. Keep!
D - Irrelevant. OUT.
E - Irrelevant, and if anything, this would adversely affect the company's image in the market. OUT.
C is the answer.
25 Jul 2017, 15:45
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mihir0710
In the United States profits from sales of Grainco’s biggest selling product, cornflakes, have dropped by 30 percent over the last 3 years. During this same time the value of a share of Grainco stock rose by over 20 percent. This is puzzling because the value of a stock usually decreases when a company’s sales decrease.
Which of the following, if true during the last 3 years, most helps to explain why the value of a share of Grainco stock moved in the way that it did?
(A) Severe drought in the Midwest destroyed a large percentage of the corn crop, forcing Grainco to buy less corn.
(B) Grainco closed a food processing plant in a locality that offered cheap labor and low taxes.
(C) Profits from sales of Grainco oatmeal, which account for a large part of Grainco’s total sales and profits, increased dramatically in both the foreign and domestic markets.
(D) Grainco employees formed a union that helped them get higher salaries and increased medical benefits.
(E) Several articles in prominent business publications listed Grainco as a company that has poor management.
Which of the following, if true during the last 3 years, most helps to explain why the value of a share of Grainco stock moved in the way that it did?
(A) Severe drought in the Midwest destroyed a large percentage of the corn crop, forcing Grainco to buy less corn.
(B) Grainco closed a food processing plant in a locality that offered cheap labor and low taxes.
(C) Profits from sales of Grainco oatmeal, which account for a large part of Grainco’s total sales and profits, increased dramatically in both the foreign and domestic markets.
(D) Grainco employees formed a union that helped them get higher salaries and increased medical benefits.
(E) Several articles in prominent business publications listed Grainco as a company that has poor management.
Boil the passage down:
+Profits from sales of biggest product have gone down. Bad news
+Normally, bad news would lead to decrease in stock price.
+ But, this time stock price went up by over 20%.
Explain --> Need something else OUT SIDE THE SCOPE OF THE PASSAGE. Because we can NOT explain the discrepancy with information already given in the passage.
A. DOES NOT HELP EXPLAIN
Buying less --> Probably selling less --> Possibly less profits <-- already given in the passage.
B. IMPOSSIBLE TO EXPLAIN
Bad news again --> stock price would go down. If B were true, it would make more discrepancy.
C. NEW INFORMATION OUT SIDE THE SCOPE OF THE PASSAGE THAT HELPS EXPLAIN.
Oatmeal:
+ accounts for a large part of total sales and profits.
+ had increase in profits from sales.
--> Good news --> stock market behaved accordingly --> stock price went up regardless of bad news from profits from sales of cornflakes.
D. IMPOSSIBLE TO EXPLAIN
Bad news again --> Like B
E. IMPOSSIBLE TO EXPLAIN
Bad news again --> Like B
IMO C is correct.
