Advanced Boldface Reasoning - GMAT Verbal

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Question

A large company has recently increased its dividend payments to shareholders. Shareholders had previously been worried about the company's stock price, but are now relieved since increasing dividends generally boosts a company's stock price. However, the shareholders' optimism may be ill-founded since spending money on the payment of dividends often indicates that the company has exhausted more lucrative investments for its cash reserves and that the stock price will likely fall in the longer run.

In the argument above, the two bold-faced portions play which of the following roles?

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Answer

This Boldface problem rewards those who can adeptly deconstruct arguments and find conclusions. Here the main conclusion of the argument is "the shareholders' optimism may be ill-founded" - you know that this is a conclusion because it is adjacent to the word "since" (which gives a reason for the conclusion - remember, conclusions must pass the "why test" in which some other portion of the argument tries to explain why it is true). And you know that it's the main conclusion because it follows "however," a signal that the author has introduced an idea and then transitioned to her main point.

With this knowledge you're ready to attack the answer choices and pick apart the subtle difference between popular choices. The first bolded portion is evidence that is used to support a conclusion (just not the main conclusion) - it's a reason that some shareholders believe that they do not have be be worried about the company's stock price.

The second bolded portion is evidence for the main conclusion - it's the reason that the shareholders' optimism may be unfounded.When you attack the answer choices, note that "The first is evidence that supports a conclusion; the second is that conclusion." and "The first is a premise that is accepted as true; the second is a conclusion that is contrary to the premise." each clearly mischaracterize the second bolded portion as a conclusion when in fact it is a premise.

Among the other choices, recognize that the goal of the argument - as evidenced by the conclusion - is to show that the shareholders' optimism is misplaced, NOT to clarify the initial fact. Again, this goes back to isolating and fixating on the conclusion. This is why choice "The first describes evidence that supports a conclusion; the second gives a reason for questioning that support." is correct: it properly notes the role of the second bolded portion, to support the conclusion that the optimism is unfounded (which, conceptually, is the same thing as questioning the shareholders' logic). Choices "The first describes the circumstance that the argument seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish." and "The first is a premise that is accepted as true; the second seeks to clarify the original premise." are each tempting, but each suggests that the purpose of the argument is to clarify the fact in the first sentence, when in fact the conclusion is clear in its intention to question the logic of the shareholders.

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