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# Profits pay for a company’s R&D, which is the company’s primary source

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Manager
Joined: 30 Jan 2017
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Profits pay for a company’s R&D, which is the company’s primary source  [#permalink]

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20 Aug 2017, 05:49
2
00:00

Difficulty:

95% (hard)

Question Stats:

39% (01:26) correct 61% (02:36) wrong based on 92 sessions

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Profits pay for a company’s R&D, which is the company’s primary source of innovation that helps the company maintain its position in the market. During recession when profits decline, companies are unable to generate enough profits to sustain prior levels of R&D. However, even during recession, the competitive pressures to innovate don’t decline.

The information given most strongly supports which of the following general claims?

a. A company that does not cut back on R&D expenses during recession most likely funds the same by means such as cutting expenses or dipping into cash reserves.
b. A company that lost its market share during recession can earn the same back by increasing spending on R&D once the recession is over.
c. The company that lose market position do not maintain a steady R&D budget.
d. A company can cut its R&D budget and still maintain its market position provided its R&D budget is higher than its competition to begin with.
e. Companies that significantly cut its R&D budget during recession generally lose a large proportion of their scientists

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Re: Profits pay for a company’s R&D, which is the company’s primary source  [#permalink]

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20 Aug 2017, 06:01
D

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Manager
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Re: Profits pay for a company’s R&D, which is the company’s primary source  [#permalink]

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21 Aug 2017, 11:20
Option D says that a company can cut its R&D budget and still maintain its market positing provided X
This X here is: Keeping its R&D budget higher than that of this competition
Note that this X is not mentioned anywhere in the passage.
X can very well be:
1. Acquiring the competition
2. Consolidating operations
3. Getting cash from other sources such as banks
The above-mentioned reasons may not be make real business sense but the point here is the strategy/condition mentioned in Option D is not mentioned anywhere in the passage. Hence, we cannot infer that.
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Profits pay for a company’s R&D, which is the company’s primary source  [#permalink]

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22 Aug 2017, 01:20
fmik7894 wrote:
Profits pay for a company’s R&D, which is the company’s primary source of innovation that helps the company maintain its position in the market. During recession when profits decline, companies are unable to generate enough profits to sustain prior levels of R&D. However, even during recession, the competitive pressures to innovate don’t decline.

The information given most strongly supports which of the following general claims?

a. A company that does not cut back on R&D expenses during recession most likely funds the same by means such as cutting expenses or dipping into cash reserves.
b. A company that lost its market share during recession can earn the same back by increasing spending on R&D once the recession is over.
c. The company that lose market position do not maintain a steady R&D budget.
d. A company can cut its R&D budget and still maintain its market position provided its R&D budget is higher than its competition to begin with.
e. Companies that significantly cut its R&D budget during recession generally lose a large proportion of their scientists

A If there is recession then also there will be stiff competition among companies to innovate thus they are likely to devote more money to R&D.
This can come from various means like cutting expanses and using more cash reserves thus funding to R&D does not decline
.

D if there are several companies competing to innovate then the company which wants to maintain market position must devote amount to R&D that is greater than the amount devoted to R&D by other companies and this will make them innovate and retain market position.

I understood the OA but i think D is also a valid contender
Experts please make me understand flaw in my reasoning .
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Re: Profits pay for a company’s R&D, which is the company’s primary source  [#permalink]

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22 Aug 2017, 02:07
arvind910619 wrote:
fmik7894 wrote:
Profits pay for a company’s R&D, which is the company’s primary source of innovation that helps the company maintain its position in the market. During recession when profits decline, companies are unable to generate enough profits to sustain prior levels of R&D. However, even during recession, the competitive pressures to innovate don’t decline.

The information given most strongly supports which of the following general claims?

a. A company that does not cut back on R&D expenses during recession most likely funds the same by means such as cutting expenses or dipping into cash reserves.
b. A company that lost its market share during recession can earn the same back by increasing spending on R&D once the recession is over.
c. The company that lose market position do not maintain a steady R&D budget.
d. A company can cut its R&D budget and still maintain its market position provided its R&D budget is higher than its competition to begin with.
e. Companies that significantly cut its R&D budget during recession generally lose a large proportion of their scientists

A If there is recession then also there will be stiff competition among companies to innovate thus they are likely to devote more money to R&D.
This can come from various means like cutting expanses and using more cash reserves thus funding to R&D does not decline
.

D if there are several companies competing to innovate then the company which wants to maintain market position must devote amount to R&D that is greater than the amount devoted to R&D by other companies and this will make them innovate and retain market position.

I understood the OA but i think D is also a valid contender
Experts please make me understand flaw in my reasoning .

Not an expert but here is my 2 cents regarding option D

From the argument, we only know that investment in R&D only helps to maintain company position. A company could still maintain its position without heavy investment in R&D.

Option D tell us that Maintain a company's position ---> Investment in R&D

Or, we can say: NOT investment in R&D ----> NOT maintain a company's position (Thus, incorrect)

--== Message from the GMAT Club Team ==--

THERE IS LIKELY A BETTER DISCUSSION OF THIS EXACT QUESTION.
This discussion does not meet community quality standards. It has been retired.

If you would like to discuss this question please re-post it in the respective forum. Thank you!

To review the GMAT Club's Forums Posting Guidelines, please follow these links: Quantitative | Verbal Please note - we may remove posts that do not follow our posting guidelines. Thank you.
Re: Profits pay for a company’s R&D, which is the company’s primary source   [#permalink] 22 Aug 2017, 02:07
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