Self-study
In contemplating major purchases, businesses often consider only whether there is enough money left from monthly revenues after paying monthly expenses to cover the cost of the purchase. ███ ████ ████████ ██ ███ █████ ████████ ██████ ████ ███████ ████ ███████ ████████ ███ █████ █ ████████ ██ ███████████ ██ ███ ███ ██ █ █████████ █████████ ██ ████████ ███ ███ ███████████
Summarize Argument
The author concludes that all businesses need to use a cash-flow statement to protect their financial health. Why? Because the frequent practice of only taking into account monthly expenses when considering major purchases can cause businesses to overexpand. This is because there are also many non-monthly expenses that should be considered.
Notable Assumptions
In order for cash-flow statements to solve the problem of non-monthly expenses, the author assumes that cash-flow statements account for all expenses, including non-monthly expenses. The author also assumes that non-monthly expenses arise for all businesses.
11.
Which one of the following, ██ █████ ████ ███████████ ███ █████████
a
Only a cash-flow █████████ ███ ██████████ ████████ ███ ███████ █████████
This doesn't tell us whether cash-flow statements can help with non-monthly statements, so it doesn't strengthen the support structure in the argument.
b
Any business that ███ ████████████ ███ ███████ ████ ███ ███ ██ █ █████████ ██████████
The author is talking about all businesses, not just those that have already overexpanded. What about cash-flow statements makes them so useful? We still don't know, so this ins't helpful.
c
When a business █████████ ████ ███████ ████████ ██ ████ █████████ ████ ███████ ████████
This is just another downside to the monthly accounting model. It doesn't tell us anything about cash-flow statements, so it's irrelevant.
d
A cash-flow statement ██ ███ ████ ███ ██ █████ ████ ███████ ████████ ███ ████████ ████ ███ ███ ████████
A cash-flow statement is necessary to simultaneously track monthly and non-monthly expenses. This strengthens the conclusion, because businesses have no other way to account for all of these expenses.
e
When a business █████ ████ ███████ ███ █████████ ███ ████ ███████ █████ ██ ███ ████ ██████ ██████████
Do cash-flow statements allow businesses to do this? We don’t know. Also, making "better" decisions doesn't necessarily mean that this strategy is always "critical." So this isn't useful.