Eisenhardt 's methodological work.
Break-Even Analysis is often applied when deciding whether to develop a new product or make a capital equipment investment, as well as helping in making decisions around how to price products and service and the number of units to produce. Note that the expression Revenue per unit — Variable Expenses per unit is often referred to as the Unit Contribution Margin.
An understanding of how to analyze Expenses and differentiate Fixed Expenses from Variable Expenses is useful in order to run a Break-Even Analysis of a company. Break-Even Analysis can get more complex, as there are microeconomic and macroeconomic considerations that can change both the Fixed and Variable Expenses, but the basic concept is an important one; therefore you will likely come across some form of Break-Even Analysis in Consulting Case Study interviews.
Note that this concept can also be translated into a question on Break-Even Price, i. Variable Expenses Fixed Expenses or Fixed Costs are expenses that do typically fluctuate regardless of the production or sales levels.
Variable Expenses or Variable Costs are impacted by changes in production or sales levels — typical examples include are Raw Materials, Direct Labor Expenses wages and benefitsand delivery costs. Variable Cost structure is important in a variety of cases such as in Break-Even Analysis, discussed above.
When analyzing a Case, always keep in mind that total Fixed Expenses remain constant as volume rises or fallsbut Fixed Expenses per unit decline as volume rises rise as volume falls. Variable Expenses, meanwhile, rise proportionately as volume increases, so Variable Expenses per unit remain constant.
Profit Margin or Net Income Marginhe or she will usually be referring to the total Net Income of a company or business line as a percentage of its Revenue: The interviewer could also refer to Gross Profit Margin, which is simply Gross Profit as a percentage of revenue: In both cases, thus is simply the figure in question Operating Profit, a.
ROI is used in consulting interviews as a way to evaluate the return of a particular investment or to assess the feasibility of a potential investment or acquisition. Many companies have an internal ROI metric for capital investments. Standard ROI is calculated as follows: Note that this is not the only growth path to grow from a beginning number to an ending number, but it is the only growth path that is the same growth rate every year.
The formula to calculate CAGR is: CAGR is very similar in concept to Internal Rate of Return IRRwhich is the annual rate of return on an investment if its value grows by a specific multiple over a specific amount of time.
The rule of 72 simply states that a quantity will roughly double in value whenever the number of years times the annual growth rate equals The idea behind this microeconomic analysis is to determine the reasonable cost to win or acquire a customer or to maintain an existing customer, i.
It can also be used to determine level and type of customer service to provide, and as another way to estimate the value of a business. The steps to calculate the LCV are as follows: Estimate the remaining customer years; in other words, how long is a typical customer expected to last with the company?
It is often used by companies to project their own anticipated Revenue figures. It is also worth knowing the four steps in the Product Life Cycle Curve, as the concept could come up in a hypothetical product case.
A new product or technology that is in initial adoption phases and therefore has very rapid growth rates for example: Product adoption is becoming widespread but still growing at an above-average rate for example: Product adoption is widespread, or at least stabilized; growth typically comes only from price increases and growth in GDP for example: Technological obsolescence, shifting consumption patterns, or increased market competition has resulted in total growth rates that are below-average or negative for example: This is an important concept throughout business and consumer decision making, as there are only finite resources available in most cases time, money, etc.
Elasticity Supply or Demand Elasticity is a concept from microeconomics that describes the tradeoff between Quantity and Price. The concept comes up in multiple types of cases, such as pricing optimization.
Clients often ask what the impact would be on volume if they adjust the price. Usually the correct answer is to increase prices in Inelastic markets price increases lead to a relatively small decrease in products sold and decrease them in Highly Elastic markets price increases lead to a large decrease in product sold.
That being said, a basic-to-moderate understanding of the Income Statement, Balance Sheet and Statement of Cash Flows, and how they work together, is very relevant to many interviews.McKinsey was the first consulting firm to systematically hire consultants with advanced professional degrees outside of business; currently, more than 3, of our consultants worldwide hold master’s degrees in fields other than business.
In the social sciences and life sciences, a case study is a research method involving an up-close, in-depth, and detailed examination of a subject of study (the case), as well as its related contextual conditions..
Case studies can be produced by following a formal research method. These case studies are likely to appear in formal research venues, as journals and professional conferences. Learn more about preparing for interviews with the firm, including videos, practice cases, and frequently asked questions.
The case interview is an example of a real business problem based on your interviewer's past work experiences. The problems you will encounter are not designed to be brainteasers, or theoretical problems designed to stump you, but rather to reflect the challenges that our clients face.
Consulting/IT: Enterprise Date. How Used? Why COBIT? Sun Microsystems/Oracle January Sun/Oracle has found COBIT matrices and mapping documents very helpful when talking about how the various frameworks all fit together. Course Area: Not a general education course Designations: Formative Experiences This accounting internship is designed for College of Business students who desire to gain real-world experience in the accounting field through on-the-job practice.