Day 1 - Take Aways From Cases

Question 1

Situational analysis

Answer 1

Don’t need to go into detail on the “why” aspect

Question 2

Fatal flaw in Day 1?

Answer 2

Avoiding numbers

Question 3

Quantitative - what to include in section

Answer 3

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

Question 4

Qualitative

Answer 4

Add “so what factor” and KSF to each pro/con

Question 5

Recommendations for ethical issues

Answer 5

1) Develop code of ethics

2) Avoid false advertising claims

Question 6

Overall conclusion

Answer 6

Provide recommendations in order of priority

Question 7

Bank covenant present?

Financial ratios and goals?

Answer 7

Discuss each option’s impact on the covenant and/or on the ratios and goals

Question 8

Min pros and cons per Strategic Option? Min number of SA ties per option?

Answer 8

Pros/cons = 6

SA ties = 3

Question 9

For Non-salary benefits or similar situation where choice between many options must be made - use a

Answer 9

Decision Matrix

• explain criteria considered in evaluation
• consider fit with mission and vision

Question 10

Manufacturing - bottlenecks

Answer 10

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)

Question 11

Financial Implications of Lease vs Buy

Answer 11

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

Question 12

Commonly missed Operational Issue

Answer 12

BOD

Question 13

Operational Issue - usually number between

Answer 13

2 or 3

Question 14

Strategic Issue - number of them?

Answer 14

Usually 4

Question 15

Large management accounting calculation?

Answer 15

• 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

Question 16

New loan?

Answer 16

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

Question 17

If a cash flow statement is given

Answer 17

Look to incorporate it in some way (e.g. debt financing and ability to make payments on new debt)

Question 18

If Return on Investment is Given

Answer 18

THAT is the discount rate to use

Question 19

If you have a discounted sales price, for COGS…

Answer 19

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

Question 20

Returns that are for CREDIT

Answer 20

do not impact cash flows

Question 21

NPV calc

Answer 21

Always use after tax CFs if discount rate is an after tax rate (return on investment WOULD BE an after tax rate)

Question 22

Elements of an appropriate compensation plan (3)

Answer 22

1) Alignment with Mission and Vision
2) Controllability
3) Goal congruence