Money Matters
What is the difference between profit, revenue, and income?
Profit/ Income: Money after expenses
Revenue: $$ before expenses
What does it suggest if a company’s costs rise faster than its revenue?
Profit margins shrinking
Name one financial and one non-financial reason a company might enter a new market.
Financial: increase revenue. Non-financial: access new customers or enhance brand reach.
Why do we segment populations (e.g., by age or income) in market sizing models?
Different segments have different behaviors, so segmentation improves accuracy.
On his first day, Danny is asked to structure a client problem using a MECE framework. He freezes. What does MECE stand for, and why is it important in consulting?
Mutually Exclusive, Collectively Exhaustive — ensures all parts of a problem are covered without redundancy. Essential for clarity and logic in casework.
A startup’s balance sheet shows negative equity. What does this indicate about its solvency?
It is insolvent — liabilities exceed assets, which may lead to bankruptcy.
If fixed costs are stable but profits are dropping, what does that tell you about pricing or variable costs?
It suggests variable costs are rising or prices are falling, hurting contribution margins.
What are two key questions you should ask about the competition before entering a new market?
1. What market share do major competitors have? 2. How differentiated are their products/services?
When estimating the number of U.S. households with smart TVs, why use household data rather than total population?
Smart TVs are typically purchased per household, not per person.
Danny is on a project where the client’s profits are falling. He wants to suggest revenue-growth strategies. His manager pushes back. Why might she instead suggest starting with cost-cutting ideas?
Revenue growth can be slower, riskier, and depend on market conditions. Cost-cutting is often quicker, more controllable, and immediate to implement.
What happens to the balance sheet if a firm finances a new building entirely with a bank loan?
Assets increase (building); liabilities increase (loan); shareholder equity remains unchanged.
Your client launched a discount campaign that boosted unit sales by 20% but reduced total profits. Why might this be the case?
Margins dropped too much — the discount reduced per-unit profit more than the increase in sales volume could offset.
In what scenario might a joint venture be more advantageous than starting from scratch?
When the market is unfamiliar or requires local knowledge, regulatory approval, or shared infrastructure.
What’s a downside of relying solely on survey data in market research for a new product?
Surveys may include bias, unrepresentative samples, or hypothetical responses, not real behavior.
Danny is analyzing a struggling retail chain named Aritzia (so he can get a discount for his gf AYYYY). The team is considering pricing strategies and one partner suggests a "loss leader" approach. What are two reasons a company might price a product below cost on purpose?
1. To attract new customers who then buy higher-margin items; 2. To increase total basket size or brand loyalty over time.
If a company’s Cost of Goods Sold (COGS) increases, what does that indicate about its gross margin and overall profitability?
An increase in COGS typically reduces gross margin, since gross margin = revenue – COGS. If revenue stays the same while COGS increases, profitability will decline, unless the company offsets it through higher prices or lower operating expenses.
Which cost category is more likely to fluctuate with changes in production volume: rent or raw materials? Why?
COGS bc these are variable costs tied to production volume; rent is a fixed cost.
Your client, a premium beverage company, is planning to launch a budget-friendly version of its flagship sparkling water.
What is brand cannibalization, and under what conditions might it still be a strategically sound decision?
Brand cannibalization occurs when a new product eats into the sales of the company’s existing products instead of attracting new customers or expanding the market.
It might still be justified if:
The new product targets a different segment the original product couldn’t reach (e.g. price-sensitive customers)
It helps the company defend against competitors in a lower-priced tier
The net gain in market share or revenue outweighs the loss
It prevents customer churn to rival brands offering similar budget options
A client believes 40% of Gen Z wants a new tech product. What follow-up research questions would you ask before launching?
What % would actually buy, what’s their willingness to pay, what are the substitutes, and how often would they repurchase?
Danny joins an M&A project involving two mid-size tech firms. He is asked to assess the value of synergies. What are TWO types of synergy he should focus on?
Revenue synergies (e.g. cross-selling, expanding reach) and cost synergies (e.g. consolidating operations, reducing overhead).
Explain how a product launch that fails could appear differently across the income statement and balance sheet in the same quarter (Hint: snapshot)
Income statement shows immediate losses (e.g., marketing spend); balance sheet shows long-term investments (inventory, equipment), not yet impaired.
A company faces falling profits despite steady sales volume. What three MECE buckets should your analysis explore?
Revenue (price), variable costs, and fixed costs — each independently affects profits.
How could entering a new market damage an existing product line, and how might you mitigate that risk?
Brand dilution or cannibalization of sales; mitigate via targeted positioning or differentiated branding.
Design a rough framework to estimate how many iced coffee cups are sold in NYC on a summer day. What are THREE key assumptions that must be made?
Population of NYC → % who drink coffee % who buy iced → avg. cups per day → seasonality factor → purchase locations (retail vs home).
Danny is struggling on his final M&A case of the summer between two companies focused on the outdoors. What would be an example of a horizontal vs vertical merger in this marketspace?
Horizontal: Any 2 clothing brands merging (like Patagonia and North Face)
Vertical: Merging with a delivery/courier service