The attached chart shows data for 5 leading U.S. technology companies,

Question

https://gmatclub.com/forum/download/file.php?mode=view&id=79090 The attached chart shows data for 5 leading U.S. technology companies, labeled A through E. The size of each circle indicates the overall market capitalization of that company last year and is shown numerically beside each letter in billions of U.S. dollars. The position of each circle’s center relative to the vertical axis shows the revenue in billions of U.S dollars last year and the position relative to the horizontal axis shows the number of years as a publicly traded company. For each of the following, use the drop-down menu to create the most accurate statement on the basis of the chart: 1. Excluding company E, the relationship shown in the graph between years as a public company and both revenue and market capitalization would best be described as GRAPH_1_PLACEHOLDER . 2. For the five companies shown in the graph, it was last year that their relative ranking in market capitalization was the same as their relative ranking in revenue. GRAPH_2_PLACEHOLDER MarketCapitalization.jpg

Bismuth83 · Answer

1. We need to  find the best option to create an accurate statement .

2.  Excluding company E, the relationship shown in the graph between years as a public company and both revenue and market capitalization would best be described as _____.  Each circle (apart from E) is separated by about 8 years as a public company - this is linear. At the same time, the revenue is increasing exponentially.  So, the relationship will be  exponential .

3.  For the five companies shown in the graph, it was _____ last year that their relative ranking in market capitalization was the same as their relative ranking in revenue.  Their ranking in market capitalization is based on the size of the circle, which means we have (from lowest to largest): E, B, D, A, and C. Now their relative ranking in revenue is based on their projection on the y-axis, which means we have (from lowest to largest): E, B, D, A, and C.  So it was  true  that the rankings are the same.

Rod728 · Answer

Why is it exponential? for every 20-30 in revenue its +100 in market cap but I don't see exponential relationship as they don't multiply over time.

Can you help me? Thanks!

bb · Answer

I’m not sure if exponential is an official characteristic of relationship but basically there could be a linear relationship where increase in one step to the right means increase in two steps up and in the linear relationship, if you increased five steps to the right to would expect to go up 10 spots. In the exponential relationship, instead of going up 10 spots when you make five to the right, you would have a higher number so for example 15 spots and when you go down to the right, instead of 20 up you have 35, etc. Or you can just look at the exponential chart on Google The above does not make sense https://en.m.wikipedia.org/wiki/Exponen ... hstum2.svg

vartikg · Answer

hi, can anyone help with the question about growth rate. the bubbles seem to double in size and the revenue is having increments of 100. So, via capitaliztion it looks exponential growth and the curve is also a little curved so can we surely say that it is exponential growth.

yc168 · Answer

The market cap (represented by size of the bubbles) roughly doubles for every additional 7-8 years of history as a public company. The revenue also roughly doubles for every additional 7-8 years of history as a public company:
B -> D: ~20 -> ~50
D -> A: ~50 -> ~110
A -> C: ~110 -> ~210

While not exact, exponential seems like a better characterization of the relationship than linear.

MehakKaushal · Answer

Company 
 Years Public 
 Revenue 
 Market Cap 
 
  B 
 4 
 20 
 102 
 
  D 
 12 
 55 
 230 
 
  A 
 20 
 110 
 467 
 
  C 
 26 
 210 
 908

As years public increase:
 
 Revenue increases.  
 Market capitalization increases.  
 The increases themselves get larger:
 
  Revenue: 20 → 55 (+35), 55 → 110 (+55), 110 → 210 (+100)  
 Market Cap: 102 → 230 (+128), 230 → 467 (+237), 467 → 908 (+441)   
  
So the relationship is  not linear  (equal increases).
Instead, both revenue and market cap appear to grow at an  increasing rate .

SwethaReddyL · Answer

Bunuel  / @hrhr18 /  bhanu29  - could you please explain the first question?

How is it exponential here? expect E, it's going approximately from 100-200, 200-400... twice! can twice be said as Exponential? exponential isn't squared?

Bunuel · Answer

Exponential does not necessarily mean “squared.” Exponential growth means that values increase by a multiplying factor, rather than by equal additions, as in linear growth.

Here, excluding E, market capitalization goes from 102 to 230, then from 230 to 467, and then from 467 to 908. So, it roughly doubles each time. That repeated multiplying pattern is why “exponential” is a better choice than “linear.”

In a linear relationship, we would expect roughly equal increases, not roughly repeated doubling.

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SwethaReddyL · Answer

thanks much bunuel, that helps a lot.

The attached chart shows data for 5 leading U.S. technology companies,

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The attached chart shows data for 5 leading U.S. technology companies,

Prep Toolkit

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