Quote:
To compete effectively in international markets, a nation's businesses must sustain investment in intangible as well as physical assets. Although an enormous pool of investment capital exists in the United States, the country's capital investment practices put United States companies at a competitive disadvantage.
United States capital investment practices, shaped by sporadic and unpredictable changes in tax policy and high federal budget deficits, encourage both under-investment and over-investment. For example, United States companies invest at a low rate in internal development projects, such as improving supplier relations, that do not offer immediate profit, and systematically invest at a high rate in external projects, such as corporate takeovers, that yield immediate profit. Also, United States companies make too few linkages among different forms of investments. Such linkages are important because physical assets, such as factories, may not reach their potential level of productivity unless companies make parallel investments in intangible assets such as employee training and product redesign. In general, unlike Japanese and German investment practices, which focus on companies' long-term interests, United States investment practices favor those forms of investment for which financial returns are most readily available. By making minimal investments in intangible assets, United States companies reduce their chances for future competitiveness.[/box_in][box_in]
Boil It Down: 1 | = | capital investment practices put United States companies at a competitive disadvantage.
Boil It Down: 2 | + | Author goes into detail about why and how those practices affect US companies and a very light comparison with Japanese and German practices.
Quote:
1. The passage is primarily concerned with
A. evaluating strategies for improving United States competitiveness in international markets The author does not talk about how to improve
B. illustrating the possible uses of investment capital True but not the primary concern.
C. analyzing some failings of capital investment practices in the United States Talks about US. Mentions some failings. Looks good.
D. suggesting reasons for increasing linkages among different types of investments No such mention
E. contrasting the benefits of investment in physical assets with the benefits of investment in intangible assets Mentioned but not the primary purpose.
Quote:
2. According to the passage, which of the following characterizes the capital allocation strategy of United States companies?
A. They tend to under-invest in intangible assets. - Supported in the passage. " United States companies make too few linkages among different forms of investments. Such linkages are important because physical assets, such as factories, may not reach their potential level of productivity unless companies make parallel investments in intangible assets such as employee training and product redesign."
B. They tend to invest heavily in product redesign. - No
C. They tend to under-invest in physical assets. - No
D. They make parallel investments in internal and external projects. - They do but it is provided as an example of capital investment.
E. They seek to allocate capital in ways that reduce their tax burden. - No such mention.
Quote:
3. Which of the following best describes the purpose of the second paragraph?
A. To propose a solution to the problem introduced in the first paragraph - No Solution
B. To provide support for an argument presented in the first paragraph - Yes. Author provides supports to the point made in Para 1.
C. To provide data to refute an assertion made in the first paragraph - Author doesn't refute
D. To discuss the sources of investment capital mentioned in the first paragraph - Clearly not the case
E. To discuss the competitiveness of international markets alluded to in the first paragraph - Clearly No.