17．The following appeared as part of a memorandum from the loan department of the Frostbite National Bank.
“We should not approve the business loan application of the local group that wants to open a franchise outlet for the Kool Kone chain of ice cream parlors. Frostbite is known for its cold winters, and cold weather can mean slow ice cream sales. For example, even though Frostbite is a town of 10,000 people, it has only one ice cream spot — the Frigid Cow. Despite the lack of competition, the Frigid Cow’s net revenues fell by 10 percent last winter.”
1. Other factors in deciding whether to give loan to a company such as the credit of the company should be considered.
2. Admittedly, the former and prospective performance of the company is also important when the bank have to make decision of whether or not should it give loan to a company. However, the author of the memorandum show no sufficient evidence to support his or her proposal that the bank should not give loan to Kool Kone chain of ice cream parlors.
3. The statistics last year does not necessarily denote the future trend.
18．“Eight years ago, our firm’s profits were increasing with each new employee we added. We discovered that each employee had the skills and motivation to generate more revenue for the firm than his or her salary cost us. However, for the past two years, our profit margin has been falling, even though we have continued to add employees. Thus, our newer employees are not generating enough revenue to justify their salaries. We must not be hiring new employees with the same level of skills and motivation as those we used to attract. Clearly, then, failures in the human resources department account for our falling profits.
19．The following appeared in a letter from a part-owner of a small retail clothing chain to her business partner:
“Commercial real estate prices have been rising steadily in the Sandida Heights neighborhood for several years, while the prices in the adjacent neighborhood of Palm Grove have remained the same. It seems obvious, then, that a retail space in Sandida Heights must now be much more expensive than a similar space in Palm Grove, which was not the case several years ago. So, it appears that retail spaces in Sandida Heights are now overpriced relative to those in Palm Grove. Therefore, it would be in our financial interest to purchase a retail space in Palm Grove rather than in Sandida Heights.”