Bonuses at DSR Industries cannot be awarded unless profits exceed a ten percent return on stockholders’ investments in the company. Higher profits mean higher bonuses. Therefore, bonuses in a year of general economic recession will be considerably lower than bonuses in a year of peak profits at DSR.

The conclusion above depends on the assumption that

  1. the firm will have relatively low profits in recession years
  2. the amount represented by a ten percent return on stockholders’ investments in the company will increase from year to year
  3. profits rarely exceed a ten percent return on stockholders’ investments in the company
  4. profits in excess of a ten percent return on stockholders’ investments in the company are all distributed in the form of bonuses
  5. bonuses at DSR never drop to zero

Highlight to see answer: C

Please post your explanations in the comments below!

2 Responses to “GMAT Critical Reasoning – Bonuses at DSR Industries”

Vishal says:

the correct answer is A.
The assumption is that the profits in the recession years are low. Only then we can say that bonuses in recession years will drastically differ from bonuses in the years of peak profit. If the assumption is not true and the profits are higher in the recession years then those years will be the same as high profit years and hence no difference in bonuses.

MARIA says:

answer

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