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The profitability of a business is reduced by anything that undermines

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The profitability of a business is reduced by anything that undermines  [#permalink]

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New post 22 Mar 2018, 13:14
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  35% (medium)

Question Stats:

71% (01:40) correct 29% (01:56) wrong based on 194 sessions

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The profitability of a business is reduced by anything that undermines employee morale. This is why paying senior staff with stock options, which allows them to earn more when the enterprise prospers, is not a wise policy because it increases dramatically the difference in income between senior staff and employees who are paid only a fixed salary.

Which one of the following is an assumption on which the argument depends?

(A) Large income differences between fixed-salary employees and senior staff tend to undermine employee morale.
(B) Reductions in the profitability of a company are usually due to low employee morale.
(C) Business firms that pay senior staff with stock options are less profitable than other firms.
(D) Reducing the difference in income between senior staff and employees paid only a fixed salary invariably increases a company's profitability.
(E) Employees whose incomes rise as the profits of their employers rise are more productive than those paid only a fixed salary.

Source: LSAT

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New post 22 Mar 2018, 20:19
Structure of the argument = when the employee morale is undermined the business becomes less profitable, Thus paying senior employees with stock is bad

Conclusion : Paying senior employees with stock is bad

There is obviously some missing information between the fact that "The profitability of a business is reduced by anything that undermines employee morale" and the conclusion that "Paying senior employees with stock is bad"

The assumption is that gap in the argument, therefore the right option will be something like "pay inequality among employees undermines employees morale"

If you move down to the answer choices :

(A) Large income differences between fixed-salary employees and senior staff tend to undermine employee morale. This exactly fits the gap in the argument mentionned above

(B) Reductions in the profitability of a company are usually due to low employee morale. Whether the company is more or less profitable it doesn't affect the conclusion that paying senior employees with stocks is not good.

(C) Business firms that pay senior staff with stock options are less profitable than other firms. Same problem as B, we don't really care about the firms profitability, it doesn't affect the conclusion

(D) Reducing the difference in income between senior staff and employees paid only a fixed salary invariably increases a company's profitability. Same as B and C, it doesn't affect the conclusion

(E) Employees whose incomes rise as the profits of their employers rise are more productive than those paid only a fixed salary. The employees who are paid with stocks will be more productive. This seems to support the conclusion, however this answer choice doesn't mention anything about the other employees productivity. What if the gain in productivity is comparatively small to loss in productivity of all the other employees not paid in stock ? In this case the conclusion would make no sense.

The right answer is A
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Re: The profitability of a business is reduced by anything that undermines  [#permalink]

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New post 01 Apr 2018, 08:04
Anyone please explain between A and C ?
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Re: The profitability of a business is reduced by anything that undermines  [#permalink]

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New post 01 Apr 2018, 19:52
abhilashsinghme wrote:
Anyone please explain between A and C ?


Hey,

What C is saying is that the companies are less profitable, but this doesn't matter to the argument, it is irrelevant.

However A is saying isthat income difference is a factor that affects an employee's morale.
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Re: The profitability of a business is reduced by anything that undermines  [#permalink]

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New post 01 Apr 2018, 20:31
Akela wrote:
The profitability of a business is reduced by anything that undermines employee morale. This is why paying senior staff with stock options, which allows them to earn more when the enterprise prospers, is not a wise policy because it increases dramatically the difference in income between senior staff and employees who are paid only a fixed salary.

Which one of the following is an assumption on which the argument depends?

(A) Large income differences between fixed-salary employees and senior staff tend to undermine employee morale.
(B) Reductions in the profitability of a company are usually due to low employee morale.
(C) Business firms that pay senior staff with stock options are less profitable than other firms.
(D) Reducing the difference in income between senior staff and employees paid only a fixed salary invariably increases a company's profitability.
(E) Employees whose incomes rise as the profits of their employers rise are more productive than those paid only a fixed salary.

Source: LSAT


Please advise isn’t option A stating what was already mentioned in the argument ? The argument here is about income difference and it’s effect on employee morale which will subsequently reduce organisation’s profitability. In my opinion , the assumption here should be something in the lines of proving there’s really a income difference between stock options and fixed salary. It might as well be the case where, fixed salary employees are also compensated with higher salary hikes and bonuses in which case the morale wouldn’t be lower and profitability is maintained. Please advise

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