GRE Prep 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.
GRE Prep Club Team Member
Joined: 20 Feb 2017
Posts: 2506
Given Kudos: 1055
GPA: 3.39
Companies are often torn between the benefits of focusing on one major
[#permalink]
31 Mar 2021, 09:37
31 Mar 2021, 09:37
1
Expert Reply
1
Bookmarks
Question 1
00:00
Question Stats:
69% (02:00) correct
31% (01:39) wrong based on 26 sessions
Hide Show timer Statistics
Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage over competitors that offer a wider range of products or services, an undiversified income stream can leave a company susceptible to major fluctuations in cash flow. We can see this tension realized when, for example, ________________.
Which of the following best completes the passage below?
(A) a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
(B) an advertising agency loses one of its clients
(C) a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
(D) a construction company opts to use non-union labor to increase its profits
(E) a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients
Re: Companies are often torn between the benefits of focusing on one major
[#permalink]
31 Mar 2021, 23:59
31 Mar 2021, 23:59
1
Quote:
Which of the following best completes the passage below?
Two conflicting forces are mentioned in the passage: focusing on a single product or service, but finding multiple sources of income. We have to find an example in which these two conflicting forces can be seen.
Quote:
(E) a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients
Only this answer mentions such a company in which a single product is offered, and the company is looking to diversify its source of income.
In all other answer choices, there is either of the two forces mentioned.
Therefore, IMO E is the correct answer.
Re: Companies are often torn between the benefits of focusing on one major
[#permalink]
01 Apr 2021, 09:39
01 Apr 2021, 09:39
2
Expert Reply
A company focuses on ONE MAJOR PRODUCT ==> relies too heavily on ONE PRIMARY SOURCE OF INCOME ==> an undiversified income stream leave a company susceptible to major FLUCTUATION IN CASH FLOW
Basically, we need to follow a pattern: one product ==> one source of income ==> fluctuation in cash flow.
ANALYZE EACH ANSWER:
• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
Correct. This company focuses on its major product. Its cash flow would be affected if some unfavorable factors happened.
• an advertising agency loses one of its clients
Wrong. The loss of one client does not affect too much to the company's cash flow.
• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
Wrong. This company actually diversifies its business.
• a construction company opts to use non-union labor to increase its profits
Wrong. Nothing about one product & one source of income.
• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients[/quote]
Wrong. SHELL GAME. you may pick E because of a word "a specialty" and you assume the company has ONLY ONE product. But actually, this company diversifies its business because it focus on using local ingredients. If one store has problem with its local ingredient, it does not affect other stores in different areas.
Basically, we need to follow a pattern: one product ==> one source of income ==> fluctuation in cash flow.
ANALYZE EACH ANSWER:
• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
Correct. This company focuses on its major product. Its cash flow would be affected if some unfavorable factors happened.
• an advertising agency loses one of its clients
Wrong. The loss of one client does not affect too much to the company's cash flow.
• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
Wrong. This company actually diversifies its business.
• a construction company opts to use non-union labor to increase its profits
Wrong. Nothing about one product & one source of income.
• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients[/quote]
Wrong. SHELL GAME. you may pick E because of a word "a specialty" and you assume the company has ONLY ONE product. But actually, this company diversifies its business because it focus on using local ingredients. If one store has problem with its local ingredient, it does not affect other stores in different areas.
