The following appeared in a newsletter offering advice to investors.
Over 80 percent of the respondents to a recent survey indicated a desire to reduce their intake of foods containing fats and cholesterol, and today low-fat products abound in many food stores.Since many of the food products currently marketed by Old Dairy Industries are high in fat and cholesterol, the company's sales are likely to diminish greatly and company profits will no doubt decrease.We therefore advise Old Dairy stockholders to sell their shares, and other investors not to purchase stock in this company.
Write a response in which you discuss what questions would need to be answered in order to decide whether the advice and the argument on which it is based are reasonable. Be sure to explain how the answers to these questions would help to evaluate the advice.
G1: Over 80 percent of the respondents to a recent survey indicated a desire to reduce their intake of foods containing fats and cholesterol,
G2: and today low-fat products abound in many food stores.
G3: Since many of the food products currently marketed by Old Dairy Industries are high in fat and cholesterol,
C1: the company's sales are likely to diminish greatly and company profits will no doubt decrease.
C2: We therefore advise Old Dairy stockholders to sell their shares, and other investors not to purchase stock in this company.
A1 (G1, C1): The survey results are reliable and can be used to predict the behaviors.
A2 (G2): The low-fat products had sold pretty well.
A3 (G3, C1): Old Dairy only profit from selling the products currently marketed.
A4 (C1, C2): Investment decisions should be made based on the anticipated profitability of the company.
Information about the customers of Old Dairy
- maybe the Old Dairy serve a group of people that are not surveyed
- perhaps the customers only buy the products for special events such as birthday or wedding
actual sales records of low-fat products and Old Dairy products
- respondents may behave differently from their answers
- do low-fat products sell well
- do Old Dairy products sell well
whether Old Dairy plan to or is able to introduce low-fat products
- maybe the company had recognized the problem and planned to introduce low-fat products
- or the company is flexible enough to respond to the change of market
whether the stock price necessarily reflects the value of the company
- maybe the overall economy is good and the investors are optimistic
- perhaps the government is manipulating the stock market