CFE - General Exam Facts Incl Day 1 Flashcards
Day 1 Structure - 4 Steps
1) Situational Analysis
2) Strategic Issues
3) Operational Issues
4) Overall Conclusion
Situational Analysis - 5 Steps
1) Mission and Vision and Values
2) Key Success Factors
3) Target Demographic/Market (only discuss if mentioned in case)
4) SWOT
5) High Level Quantitative - FS
Strategic Issues - Steps
1) Quantitative analysis
a) RESTATE the quants from Excel
b) impact on overall financials
c) discuss the assumptions (less emphasis on this than on above 2)
2) Qualitative Analysis
A) Pros - Link each pro to SA
B) Cons - Link each con to SA
C) Any additional quals requested
D) Recommendation with any financing considerations
Note: if multiple sub options/issues within each strategic analysis, have pro/con section for each
Function of overall conclusion
1) Wrap up report
2) Prioritize recommendations
3) Final links to strategic options
Operational Issues
1) Look for ethical issues - recommend developing code of ethics
2) Look for governance/org structure issues
3) Tie into SA
Day 1 Case
4 Hours Marmani 1 hour plan 0.25 hours pause 2.5 hours write 0.25 hours review
Day 2 Case
5 Hours Role 1.5 hours plan 0.5 hours pause and integrate 2.5 hours write 0.5 hours review and integrate
Marmani Cap 1 Vision
Our vision is to be a leader in the apparel industry by creating products that perform beyond expectation for our customers and make people’s lives better
Marmani Cap 1 Mission
We accomplish our vision by designing and selling technical clothing that offers optimal functionality while still being attractive.
Marmani Cap 1 Values
- passion for everyone to stay active and lead a healthy lifestyle - quality, a high level of service, and value for customers - innovative clothing designs and production practices - ethical and environmentally sustainable operations
Marmani Cap 1 KSFs
1) Multiple sources of revenue (mult product lines)
2) Launching product at appropriate price
3) Using technology to improve efficiency and effectiveness in the production process
4) Using technology to improve multi-channel approach to sales (digital marketing)
5) Achieving control over supply chain, enabling cost control and purchase of high-quality inputs
6) Creating a desirable brand in an underservered niche
7) Having effective marketing and distribution (sales agents or sales team?)
8) Continually producing new and appealing designs (constant innovation)
9) Getting customers involved and researching customers’ needs (customer research and feedback)
10) Providing high quality products
11) Employing an experienced and versatile labour force
Role of Board of Directors / Organizational Strucutre - OFTEN an operational issue
Look for Triggers Indicating that:
1) BOD only meets annually to approve budgets and FS
2) BOD is not involved in strategic decisions
3) Strategic analysis reports were asked to be addressed to management rather than the BOD
4) Lack of strategic oversight
5) Questions about decision making and reporting structure (e.g. Roberto as single point of contact for the BOD)
- evaluate how this is working (whether management is reporting to BOD through him, whether mgmt making strategic decisions or BOD is making operating decisions, etc)
6) Strategic decisions being discussed by management and not relayed to BOD for feedback or final decision making
Ways to Recommend Improvement to BOD function
1) Recommend meet more frequently than annually (monthly or quarterly)
2) Recommend management and BOD meet regularly
3) Recommend significant strategic decisions be presented by mgmt to the BOD for consideration in overall strategic plan
4) Budgeting and related financial strategic planning should be multi year, so when the BOD approves the annual budget, includes more projected cash flows to help ascertain whether strategic direction being followed
Elements of FINAL OVERALL CONCLUSION (after Strategic Options and Operational Issues discussed)
1) Recap recommendations in order of priority - strategic decisions
2) Recap recommendations for operational issues as well (these usually lower in priority)
3) Write an overall conclusion statement:
“By implementing these recommendations, Marmani will be able to continue to grow and to experience strong sales and profits as it continues to expand within the ______ industry(ies)”
Typical Operational Issues Seen
1) Accounting Type Operational Issues: e.g. Lease (capital or operating)
2) Enabling Competency Operational Issues: e.g. ethical issues (whether to retain credit from supplier, whether to disclose unethical/unfair labour practices used in supply chain); whether an employee or manager has been making questionable decisions
3) Governance Operational Issues: e.g. critique structure of reporting to BOD/through Roberto; critique effectiveness of BOD governance (strategic direction vs involvement in mgmt), etc
Day 2 AO Identification
1) If there are debt covenants that might be breached - CALCULATE THEM as it is KEY to assurance
2) If there is potential conflict of interest or other ethical issue ANALYZE THIS SEPARATELY
3) If when looking at issues they seem like issues but they are not related to other parts (e.g. would have to discuss on own - retractable preferred shares, FX that is just mentioned in passing, indefinite useful life intangibles), these ARE NOT AOs and just ignore them. Rule of thumb: if the issue seems like a 3-5 minute issue, ignore it and only include if ALL ELSE is done first
Quants
In Quants, ensure that you restate the results obtained from quant analysis in WORD (from excel) and give a CONCLUSION in word regarding analysis in excel
Steps Generally
IGARU
Always conclude on overall recommendation (even for tax, finance, strategy, PM etc AOs)
PROS and CONS
AT LEAST 6 PROS
AT LEAST 6 CONS
Overall Conclusion
Ensure each element of the overall conclusion is tied back in some way to the SA; Ensure recommendations are ranked in terms of priority.
