QUESTION TEXT: Acme's bank loan must be immediately repaid…
QUESTION TYPE: Necessary Assumption
CONCLUSION: Acme will have to declare bankruptcy.
REASONING: Acme must declare bankruptcy if its annual earnings are below $1 million. Last year, its reported earnings were well above $1 million. However, it recently had to revise its earnings downwards.
ANALYSIS: The author leaves out an obvious possibility: maybe the revised figures are still above $1 million. They have to assume this isn’t true.
- CORRECT. If this isn’t true, the argument falls apart.
Negation: Acme’s earnings for last year, when accurately stated, are still above $1 million.
- This isn’t necessary. The author said that the bank loan by itself is enough to cause bankruptcy.
- It doesn’t matter. Even if last year is the only bad year, a single year is enough to trigger repayment.
- This isn’t necessary. This would prove the conclusion, but the conclusion could still be true even if this were false.
Negation: Acme will earn over $1 million this year, but last year’s restated earnings will be below $1 million, triggering repayment.
- The argument would be stronger if this were false! The author is trying to prove Acme will go bankrupt.
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