LSAT 102 | Section 3 | Logical Reasoning: Q13

LR Question 13 Explanation

QUESTION TEXT: A company with long-outstanding bills owed by its…

QUESTION TYPE: Necessary Assumption

CONCLUSION: You shouldn’t sell your debts to a collection agency.

REASONING: A collection agency only pays 15% of the face value of the debt.

ANALYSIS: This is a bad argument. Of course you shouldn’t sell your debt if you can collect 100% of it on your own.

But if you’re having trouble collecting, you might only be able to recover 5-10%. This could happen if your customers become bankrupt.

In that case, it could make sense to sell the debt for 15%.

___________

1. CORRECT. If this isn’t true then it will often be a good idea to sell the debt. Otherwise companies would make even less than 15%.
2. Even if the cost was 20%, a company could still recover 80% of its total debt. That would be sensible.
3. This doesn’t matter. We’re only concerned with what is most profitable for the companies who own debts. We don’t care what is profitable for the collection agencies.
4. 15% of customers doesn’t necessarily have anything to do with 15% of total debt owed. A handful of customers could have 95% of the debt.
5. It doesn’t matter what most customers do. The conclusion is only about whether it is ever profitable to sell debt to collections agencies.

Recap: The question begins with “A company with long-outstanding bills owed by its”. It is a Necessary Assumption question. Learn how to master LSAT Necessary questions on the LSAT Logical Reasoning question types page.