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FY Math / Analytical Reasoning 101 September 30 th , 2010

FY Math / Analytical Reasoning 101 September 30 th , 2010. Agenda. Roadmap check-in Case analysis overview Sample case demonstration Case math: a structured approach Calculation best practices Practice Time. Now is a great time to research firms and work on distinguishing yourself.

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FY Math / Analytical Reasoning 101 September 30 th , 2010

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  1. FY Math / Analytical Reasoning 101September 30th, 2010

  2. Agenda • Roadmap check-in • Case analysis overview • Sample case demonstration • Case math: a structured approach • Calculation best practices • Practice Time Roadmap Math

  3. Now is a great time to research firms and work on distinguishing yourself Targeted Exceptional Analytical Today Sep Oct Nov Dec Jan Feb Targeted T.E.A.M. Model Exceptional Analytical Mature Presentations Recruiting Events Networking events Resume drops Interviews Roadmap Math

  4. Your Roadmap to a consulting position Upcoming events Case Prep Opportunities Expectations These DMCC events will facilitate your preparation for consulting interviews Roadmap Math

  5. Today’s session covers the basics of analytical reasoning and how math appears in cases January (Interviews) Fine Tuning Confidence & Composure Fall 2 Accounting & Finance Subject Areas Economics Marketing Strategy Analytical Reasoning (Math) Fall 1 Interview Foundation Hypothesis Based Problem Solving (Case Basics) “Telling Your Story” (Behavioral) October Roadmap Math

  6. Case Interview feedback formCase _______________________ Case type ______________ Interviewer ____________________ Execution Case start time __:__ • Structure • Logical approach • MECE • Appropriate drive to solution • Quantitative Ability • Speed • Accuracy • Comfort, reaction to mistakes • Business intuition • Practical • Insightful • Breadth & depth across multiple functions • Creativity Framework development ______ min Framework explanation ______ min Case discussion ______ min • 1 2 3 4 5 • Comments: Case end time ___:____ • 1 2 3 4 5 • Comments: Overall Rating: 1 2 3 4 5 Strengths • 1 2 3 4 5 • Comments: Communication • Professionalism • Poise • Confident-Persuasive • Articulate-concise • Client ready • Written • Clarity of writing and page layout • Ability to refer back • Comfort, reaction to mistakes • 1 2 3 4 5 • Comments: Weaknesses • 1 2 3 4 5 • Comments: Behavioral (optional) • Quality of star stories 1 2 3 4 5 Comments: • Length 1 2 3 4 5 • Clarity 1 2 3 4 5 • Relevance 1 2 3 4 5 Key: 1=Bottom 10%, 2= 10th-25th percentile, 3= middle 50%, 4= 75th-90th percentile, 5=Top 10%

  7. Agenda • Roadmap check-in • Case analysis overview • Sample case demonstration • Case math: a structured approach • Calculation best practices • Practice Time Roadmap Math

  8. Problem / Ambiguity ID key numbers & quantify the situation Develop problem insights using the answer & #s Use #s/analytics to develop projections Consultants use math analysis to develop solutions to ambiguous problems Roadmap Math

  9. Problem / Ambiguity ID key numbers & quantify the situation Develop problem insights using the answer & #s Use #s/analytics to develop projections Case interviews assess a candidate’s ability to use analysis to solve the business problem • Does the candidate: • Develop a good approach to reduce complexity • Understand when numeric analysis is necessary • Does the candidate: • ID key numbers • Choose the right level of granularity • Make sound assumptions about missing numbers • Does the candidate: • ID appropriate analysis • Have a structured math approach • Show comfort w/ numbers and calculations • Does the candidate: • Tie the numbers back to the big picture • Develop insights into the problem Roadmap Math

  10. Agenda • Roadmap check-in • Case analysis overview • Sample case demonstration • Case math: a structured approach • Calculation best practices • Practice Time Roadmap Math

  11. Example case: Smile-Bright toothpaste Your client, Smile-Bright toothpaste has decided that selling electronic toothbrushes would be a great way to increase sales of it’s toothpaste; however, they only want to do this if the electronic toothbrushes can be profitable on their own. How would you advise them? Roadmap Math

  12. Agenda • Roadmap check-in • Case analysis overview • Sample case demonstration • Case math: a structured approach • Calculation best practices • Practice Time Roadmap Math

  13. Case math is generally simple arithmetic Definite interviewee expected skill-set Generally not expected*

  14. Like a case, the analytics should be structured 1 2 3 4 5 6 At no point should an interviewee go heads down or silent for more than 15-20 seconds. Analysis should be an interactive process

  15. A structured approach provides a framework for sound analytics Problem / Ambiguity ID key numbers & quantify the situation Develop problem insights using the answer & #s Use #s/analytics to develop projections Identify if analytics are needed 1 Structure approach Gather key numbers (estimate missing #s) 2 3 Fit in big picture 6 4 Calculate Check work 5

  16. A structured math approach will help candidates of all analytical abilities Benefits for those who are “strong” at math Benefits for those who are “weak” at math A good practice for good “casing” is to always explain what you are going to do before you do it, and walk your interviewer what you’re doing every step of the way

  17. Common Math Mistakes Mistake Example • Johnny’s Apple Company sold 20M barrels of seed in 2010 • Each barrel has 100 seeds • Therefore Johnny’s Apple Co. sold: • 20,000,000*100 or 200M seeds Miscount the Zeros! WRONG • 20,000,000*100 or 2000M or 2B seeds RIGHT • The price per standard room on a cruise ship is $560/week • The RowBoat Luxury Shipping Company has the following assets: • 3 fleets of luxury cruise boats • Each fleet has 15 ships • Each ship has on average 5 decks • Each deck has on average 60 rooms • How much does RowBoat make per day? • 3 fleets* 15 ships/fleet * 5 decks/ship* 60 rooms/deck * 560= $7.56M Confuse terms WRONG • 3 fleets* 15 ships/fleet * 5 decks/ship* 60 rooms/deck * $80/day= $1.08M RIGHT

  18. Common Math Mistakes Mistake Example • What is the average revenue per elderly customer? • (Silence) Silent math WRONG • Talk through each step! • “You mentioned elderly customers make up 2/3 of total customer base but 1/3 of total revenue. With a total customer base of 1M, that means there are ~.67M elderly customers. Total revenues are 50M. If revenues were 100M, elderly revenues would be 33M. Since revenues are 50M, or half of 100M, elderly revenues are half of 33M, or around 16.67M. That means average revenue per customer is 16.67/..67. To put this in easier terms, lets multiply be 3/2 rather than divide by 2/3. So 16.67 divided 2 is 8.33, then times 3 equals 25. So average revenue per elderly customer is $25” RIGHT • Calculate the payback period if a machine costs $260,000 and the total lifetime revenue for the machine is $30,000/year I don’t do division • “I should divide 260,000 by 30,000, but I didn’t practice division. How about another question?” WRONG • Simplify, then divide. 260,000/30,000= 26/3 (much easier) • 3 goes into 24- 8 times with 2 remaining. So the answer is 8 and two thirds! RIGHT

  19. Smile-Bright breakdown Potential Revenue Cost structure 1 2 3

  20. Smile-Bright breakdown Potential Revenue Cost structure 4 5 6

  21. Agenda • Roadmap check-in • Case analysis overview • Sample case demonstration • Case math: a structured approach • Calculation best practices • Practice Time Roadmap Math

  22. Percents and fractions are very common in case interviews Calculation Best Practices 4 .75 = 75% = 75 out of 100 = 3/4 .33 = 33% = 33 out of 100 = 1/3 TIPS

  23. Interviewees can represent numbers in any way, but are best served to be consistent Calculation Best Practices 4 Good: 1M, .01M, 20M Caution: 1,000,000, 10K, 20M TIPS Roadmap Math

  24. Case math can greatly simplify if you choose the correct units Calculation Best Practices 4 Good: $ / cubic feet / mile Caution: $ / boat TIPS Roadmap Math

  25. Rounding may be used to simplify complex math Calculation Best Practices 4 Good: 1.37*66% = 1.5*2/3 = 1 Caution:1.4*66% =lots of math TIPS Roadmap Math

  26. Distilling case problems into formulas shows structure and allows for graphing Calculation Best Practices 4 Cost = FC + VC * Q China $3m Mexico $1m Num of toothbrushes Roadmap Math

  27. Tables are very useful for keeping track of numbers and details Calculation Best Practices 4 Manufacture in China Manufacture in Mexico TIPS

  28. Other tips: Division and Multiplication decomposition Division decomposition Multiplication decomposition Keep your eyes out for other tips while working with students

  29. Other tips: Rule of 72 & Averages Rule of 72 Averages Keep your eyes out for other tips while working with students

  30. Other tips: 1% and 10% rule 1% rule 10, 20, 25% rule Simplify whenever possible

  31. Other tips: % of round numbers and division simplification % of round numbers Division simplification Simplify whenever possible

  32. Agenda • Roadmap check-in • Case analysis overview • Sample case demonstration • Case math: a structured approach • Calculation best practices • Practice Time Roadmap Math

  33. Practice Time You are the captain of your first year campout team. Despite many requests, you have limited your team to 20 people. You are traveling to Costco to purchase beer and water for the weekend. You received the following data from informed second years: • Begins on Friday at 7pm and goes to Sunday at 7am • Average beer consumption: 1.5 beers/hour/person • Each beer has 12 ounces and comes in cases of 24 beers • Due to the new campout rules, you must have 2 ounces of water per ounce of beer • Each water bottle has 20 ounces and comes in packages of 12 How many cases of beer and how many packages of waters do you need to buy?! Roadmap Math

  34. Practice Time Your client wants to commercialize a new chemical that improves the quality of apples. What is the maximum price the charge for a hectoliter of the chemical? • Market = Maine • Maine = 800 orchards • Average orchard = 100 acres • Average revenue =$30,000 / orchard • 25% of revenue is full apples • 75% of revenue comes from juice • The chemical improves apple yield by 10% and juice yield by 5% • Each hectoliter can cover 200 acres Roadmap Math

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