Additional knowledge

Question 1

Percentage change:

Relationship between growth factor and percentage change

Answer 1

g (% growth) = GF (growth factor) - 1

Question 2

Percentage change: Multi period growth

Answer 2

Net growth factor = sum of all the individual growth factors

Net GF = GF1 * GF2 * GF3
Net growth percent: Net GF - 1

Question 3

Percentage change: Growth factor

Answer 3

Final value of variable divided by initial value of variable

Question 4

MECE entrant framework

Answer 4

Customers, competition, company, and product

Question 5

Cost drivers buckets

Answer 5

Fixed vs variable

Question 6

Market growth buckets

Answer 6

Macro vs micro factors

Ask “What is growth?” (Increase in sales vs customer base)
Micro- what can our firm do? Increase sales per customer, steal from competitors
Macro- what are the global trends our firm can capitalize on? Introduce new products, expand to new markets

Question 7

Profit buckets

Answer 7

Internal vs external (look at external first with industry trends)

Question 8

Catch all bucket

Answer 8

Negative factors (regulations) and positive factors (new product innovation)

Question 9

PE case framework

Answer 9

1. Company attractiveness (profit, market share, segments, customer relationship)
2. Market attractiveness (size, growth, profitability, trends, threats)
3. Competitive environment (new entrants, barriers to entry, threats, market fragmentation)
4. Feasibility and profitable exit (synergies, existence of other buyers)

Question 10

Profit multiple

Answer 10

Earnings multiple (take the valuation of the company and divide by the annual profit)