Pronoun Antecedent Error: Need Clarification

[christine.mngu]

Can you help me clarify the answer explanation to this pop quiz question that can be found on page 55 of the Foundations of Verbal EBook or page 72 of paper book?

True or False: The sentence "The company's profits were outstanding, and it went bankrupt because of outrageously poor management" would be considered incorrect on the GMAT.

I understand that AND should be BUT. I also understand that the use of pronoun "it" is incorrect as its antecedent (company's) is actually an adjective. The sentence should read "The company's profits were outstanding, but the company went bankrupt because of outrageously poor management."

Is this correct?

[tim]

You seem to have the right idea. How did the book explain the answer, and what do you need clarified about that explanation?