XAT 2018 — Decision Making Question 4
Answer the following question based on the information given below.
Lal & Sons, a family business, comprises three different companies in three different industries. Sudarshan Lal was heading this entire business from the inception. Two years ago, he hired three managers, one for each company and Chhaganlal Jha as Chief Executive Officer (CEO) to look after the entire business. These three managers are reporting to the CEO. However, Sudarshan Lal and his family still own the entire business, though they are not involved in day to day operations. Two years after the handing over, Sudarshan was concerned that none of the companies, except one, is profitable.
Which of the following information, if true, will most likely reduce Sudarshan's concerns?
Answer & solution
A leading financial institution recently advised its investors to purchase the shares of the two loss making companies with a long term outlook.
- B
The Corporation's performance was stagnant for three years, before Sudarshan handed it over to professionals.
- C
The best performing division belongs to an industry, which is growing in double digits.
- D
People holding senior positions have been replaced two years ago by fresh and young talent.
- E
The rate at which employees are leaving the best performing division is higher than the industry average.
Sudarshan Lal is worried that two of his three companies are in the red. However, if a leading financial institution has advised its investors to purchase the shares of these two loss-making companies with a long-term outlook, it is understood that they may overturn their losses and post good profits in the future. Thus [1] is helpful in the given situation. [2] does not address Sudarshan Lal’s concerns at all. Similarly, [3] does not talk about the two loss-making companies. [4] and [5] only talk about employees. They don’t help in providing clarity on the two loss-making companies.
Hence, the correct answer is option 1.