QUESTION TEXT: President of Central Supply Company: Profits are…
QUESTION TYPE: Flawed Reasoning
CONCLUSION: We have to slow down our expansion or get rid of some less profitable divisions.
REASONING: We might go bankrupt if our profits stay low.
ANALYSIS: This is a really bad argument. There are a million and one ways a company can save money. For some reason, the president thinks there are only two.
___________
- This is fine to assume. Most companies are better off not failing.
- The president is aware that there is an alternative. If the company doesn’t lose money, they’ll do alright.
- The president didn’t say that decreased demand is the only cause of lower profits. He said that this time, decreased demand was to blame.
- The company might not survive until the next fiscal year if it doesn’t increase profits.
- CORRECT. There are as many ways for a company to cut costs as there are expenses.
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