Things to Memorize Flashcards

Question

examples of revenue synergies

Answer 1

access to new customer base or market, cross selling products to existing customers, overlapping distribution channels

Answer 2

reduced overhead or fixed costs from consolidating functions (I.e. HR, marketing, IT infrastructure, physical facilities), increased buying power

Answer 3

1. company A lacks particular product/offering in portfolio and is easier/cheaper to acquire another company that does instead of investing resources organically 2. cost/revenue synergies 3. company A sees smaller high growth competitor as threat 4. diversify portfolio (increase revenue resiliency to changing customer preferences. ex: beer company acquiring a soda company)

Answer 4

comprised of firms that have lots of $$ and invest/purchase companies for sake of ROI 1. flipping companies (think house flippers. underperforming companies not necessarily attractive for m&a) 2. purchasing companies that create synergies with rest of companies in their portfolio if you get a PE question ask what ROI strategy they're using

Answer 5

high if customers may buy less if even a small increase in price more likely to have high price sensitivity if several suppliers/substitutes (I.e. clothes vs. insulin) finance strategy: important to figure out if added revenue of increased price is greater than loss of revenue from selling less product (same goes for decreasing price)

Answer 6

organic (internal): increase quantity sold, change price, new products inorganic (external): m&a (take in revenue of new company)

Answer 7

variable costs: switch suppliers (cheaper price or substitute), use less raw material per product, renegotiate contracts. be aware of decreasing product quality fixed costs: renegotiate contracts, reduce work force/hours (harder than reducing variable costs)

Answer 8

advantage a company gets in buying power as it produces and sells more product allows company to buy raw material cheaper and consequently lower product price point and sell more. cycle ends when company reaches max benefit of economies of sale

Answer 9

growth rate = (new - old) / old

Answer 10

are there alternative markets to enter? would it be better to enter via partnership or acquisition? are there alt. products we can launch? are there alt. acquisition targets? are there alt. investments we can make?

Answer 11

what are potential revenue synergies? cost synergies? are those synergies realizable? how long will that take?

Answer 12

increase profit: sell more product. assuming product is profitable, the more sold, the more profit made. selling more product doesn't do much for profitability. increase profitability: decrease costs and sell product at same price or increase price of product and have costs remain unchanged

Answer 13

reduction in revenue of one product as a result of the introduction of a new product by the company (I.e. customers might switch from buying high-profit to low-profit product) change in profit = profit from new product - loss in profit from existing customers switching from old to new product

Answer 14

``` Output = Rate * Time Utilization = Output / Maximum Output ```