Day 1 - Take Aways From Cases Flashcards
Situational analysis
Don’t need to go into detail on the “why” aspect
Fatal flaw in Day 1?
Avoiding numbers
Quantitative - what to include in section
1) Perform calc in excel
2) Provide summary in word of calc in excel
3) Discuss impact on financial performance if relevant
4) Discuss assumptions
Qualitative
Add “so what factor” and KSF to each pro/con
Recommendations for ethical issues
1) Develop code of ethics
2) Avoid false advertising claims
Overall conclusion
Provide recommendations in order of priority
Bank covenant present?
Financial ratios and goals?
Discuss each option’s impact on the covenant and/or on the ratios and goals
Min pros and cons per Strategic Option? Min number of SA ties per option?
Pros/cons = 6
SA ties = 3
For Non-salary benefits or similar situation where choice between many options must be made - use a
Decision Matrix
- explain criteria considered in evaluation
- consider fit with mission and vision
Manufacturing - bottlenecks
1) Production line can only produce items as quickly as the slowest part of the production line allows it to - speeding up any step besides this one has no benefit
2) Look at overall production process for other areas where an excessive amount of resources are devoted to a non-bottleneck area (speeding way beyond the max speed as limited by bottleneck)
Financial Implications of Lease vs Buy
1) Is there enough excess cash to buy it outright?
2) Cost of lease vs cost of financing to finance loan (if there is a need for the loan in order to buy it)
- calculate the rate implicit in the lease
Commonly missed Operational Issue
BOD
Operational Issue - usually number between
2 or 3
Strategic Issue - number of them?
Usually 4
Large management accounting calculation?
- step back and ensure all inputs to calc from case are at least included (for partial) somewhere, or there is a note as to why they were excluded
New loan?
Calculate repayments: assumption is that loan repayments are BLENDED pmt of interest and principal
PMT = (interets%, nper, PV, FV =0)
Consider current excess cash flow available and whether or not will be able to repay loan
If a cash flow statement is given
Look to incorporate it in some way (e.g. debt financing and ability to make payments on new debt)
If Return on Investment is Given
THAT is the discount rate to use
If you have a discounted sales price, for COGS…
Know that COGS as a % of sales price WILL CHANGE (gross margin will fall, COGS as a percentage of sales price will increase) as COGS will stay the same
Returns that are for CREDIT
do not impact cash flows
NPV calc
Always use after tax CFs if discount rate is an after tax rate (return on investment WOULD BE an after tax rate)
Elements of an appropriate compensation plan (3)
1) Alignment with Mission and Vision
2) Controllability
3) Goal congruence
