easy · GMAT Verbal Reasoning
An analysis of a company's past five years shows that every time the marketing budget was increased by at least 10%, sales also increased. The CEO concludes that increasing the marketing budget is a reliable way to drive sales growth.
Which of the following indicates a flaw in the CEO's reasoning?
- The reasoning ignores that a third factor, such as general economic growth, may have caused both the budget and the sales increases.
- The CEO does not specify the exact percentage increase in sales that followed each of the budget increases during the five-year period.
- Increasing the marketing budget may lead to higher costs that reduce the company's overall profit margin even while sales continue to grow.
- A 10% increase is a relatively small change, and a change of that size may not be large enough to be statistically significant on its own.
- The company's competitors also increased their marketing budgets during the same five-year period, according to an industry trade publication.
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