|
|
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.
Customized
for You
Track
Your Progress
Practice
Pays
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Updated on: 22 Nov 2025, 05:32
Originally posted by Sajjad1994 on 29 Mar 2020, 10:08.
Last edited by Bunuel on 22 Nov 2025, 05:32, edited 3 times in total.
Last edited by Bunuel on 22 Nov 2025, 05:32, edited 3 times in total.
Moved to new forum
Kudos
Bookmarks
Dropdown 1: 2.0x
Dropdown 2: 6.8x
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
85%
(hard)
Question Stats:
65% (02:42) correct
35%
(02:54)
wrong
based on 643
sessions
History
Date
Time
Result
Not Attempted Yet
GMAT Pill
The graph here is a scatter plot of 7 points, each representing a company's return on capital and EV/Capital ratio in the fictitious Widgets industry.
Return on Capital is defined as EBIT (Earnings Before Interest and Taxes) divided by Capital (or EBIT/Capital).
The slope provided is y-axis over x-axis; here the slope is (EV/capital) / (EBIT/captial) = EV/EBIT. An EV/EBIT slope of 8.0x is drawn as a dotted line.
Use the drop-down menus to fill in the blanks in each of the following statements based on the information given by the graph.
1. Among the companies listed, if a company had a ROC % no more than 40%, it had EV/Capital ratios of no more than .
2. Referencing the 8.0x EV/EBIT slope, the appropriate EV/EBIT multiple for the Widgets industry is most closest to .
123w.jpg [ 31.32 KiB | Viewed 7388 times ]
The graph here is a scatter plot of 7 points, each representing a company's return on capital and EV/Capital ratio in the fictitious Widgets industry.
Return on Capital is defined as EBIT (Earnings Before Interest and Taxes) divided by Capital (or EBIT/Capital).
The slope provided is y-axis over x-axis; here the slope is (EV/capital) / (EBIT/captial) = EV/EBIT. An EV/EBIT slope of 8.0x is drawn as a dotted line.
Use the drop-down menus to fill in the blanks in each of the following statements based on the information given by the graph.
1. Among the companies listed, if a company had a ROC % no more than 40%, it had EV/Capital ratios of no more than .
2. Referencing the 8.0x EV/EBIT slope, the appropriate EV/EBIT multiple for the Widgets industry is most closest to .
Attachment:
123w.jpg [ 31.32 KiB | Viewed 7388 times ]
Archived Topic
Hi there,
This topic has been closed and archived due to inactivity or violation of community quality standards. No more replies are possible here.
Where to now? Join ongoing discussions on thousands of quality questions in our Graphs and Tables (G&T) Forum
Still interested in this question? Check out the "Best Topics" block below for a better discussion on this exact question, as well as several more related questions.
Thank you for understanding, and happy exploring!
ShowHide Answer
Official Answer
Dropdown 1: 2.0x
Dropdown 2: 6.8x
29 Mar 2020, 12:16
Kudos
Bookmarks
1)B,since per the graph if a company had a ROC % no more than 40%, it had EV/Capital ratios of no more than 2.
0x
2)A,6.8x,since it is slightly less than 8.0x
Posted from my mobile device
0x
2)A,6.8x,since it is slightly less than 8.0x
Posted from my mobile device
10 Apr 2020, 01:01
Kudos
Bookmarks
1)B,
As per the graph if a company had a ROC % no more than 40%, it had EV/Capital ratios of no more than 2.
2)A
Any line parallel to 8.0X line has the same slope. Lets draw a line parallel to 8.0X Ev/EBIT line such that it intersects the starting point of the EV/EBIT multiple line for widgets. It is evident that the EV/EBIT multiple line for widgets industry is is below this drawn line which implies that its has slope less less than 8. only option which satisfies this condition is A, 6.8 slope.
As per the graph if a company had a ROC % no more than 40%, it had EV/Capital ratios of no more than 2.
2)A
Any line parallel to 8.0X line has the same slope. Lets draw a line parallel to 8.0X Ev/EBIT line such that it intersects the starting point of the EV/EBIT multiple line for widgets. It is evident that the EV/EBIT multiple line for widgets industry is is below this drawn line which implies that its has slope less less than 8. only option which satisfies this condition is A, 6.8 slope.
