Mckinsey & Co. Interview

Question 1

Break-even

Answer 1

Fixed Costs / Contribution Margin

Fixed Costs/ (Selling price - Variable Cost per unit)

&

Initial Investment/ Annual profit

Question 2

Market Share

Answer 2

Company Sales/ Market Sales

Question 3

Market Sales

Answer 3

Percent of Sales in the Total market * Total Market (# that represents 100% of shares)

Question 4

Company Sales

Answer 4

Market Sales/ Units being sold per (gallon, lbs, gram, etc)

Question 5

Key factors to consider when launching a new product (Framework)

Answer 5

• target demographic
• competitors
• costs & pricing
• company’s ability to meet demand
• ideal distribution channel

Question 6

What a company can do to increase market share (Framework)

Answer 6

• targeted branding/ advertising
• good product image
• ample research on the target audience
• secured access to preferred distribution channels

Question 7

How many years would it take until the investment turns profitable? (steps not equation)

Answer 7

Step 1: Incremental Revenues
Step 2: Resulting Profits
Step 3: Expected upfront investment
Answer (Final step): Length (in years) for an investment to be profitable

Question 8

Incremental revenue

Answer 8

the expected increase in incremental revenue (rate/decimal) * Total Revenue

Question 9

Resulting profits

Answer 9

Incremental revenue - Annual all-in additional costs

Question 10

Expected upfront investment

Answer 10

Add up all first-year investments together

** Does not include annual all-in additional costs

Question 11

Length (in years) for an investment to be profitable

Answer 11

Expected upfront investment/ resulting profits

Question 12

Revenue

Answer 12

Volume x growth x price

Question 13

Variable costs

Answer 13

cost per unit x volume of units

Question 14

Fixed Cost

Answer 14

The total cost of production - (variable cost per unit * # of units produced)

Question 15

Contribution Margin

Answer 15

Selling price - Variable Cost per unit

Question 16

Return on Investment (ROI)

Answer 16

Initial Investment/ Annual Profit

Question 17

What Is a Good ROI?

Answer 17

approximately 7% or greater (Forbes)

Question 18

Ways to increase profits

Answer 18

• Reducing costs
• Increasing turnover
• Increasing productivity
• Develop new business strategies

Question 19

Steps to find Market share

Answer 19

1. Market Sales
2. Company Sales

Question 20

Variable costs definition

Answer 20

a cost that varies with the level of output.

Question 21

Fixed costs definition

Answer 21

business costs, such as rent, that are constant whatever the number of goods or services produced

Question 22

Profit

Answer 22

(Price - Variable Costs) * Quantity - Total Fixed Costs

Question 23

Profit margin

Answer 23

Profit / Revenue

Question 24

Is this an attractive market? (Framework)

Answer 24

• Market size
• The market growth rate
• Average Profit margins

Question 25

Is there heavy competition? (Framework)

Answer 25

- how many competitors - competitive advantages - competitor market share

Question 26

Can they enter the market? (Framework)

Answer 26

- do synergies have to be leveraged? - can they meet demand? - how will they reach their demographic

Question 27

Synergies

Answer 27

the concept that the combined value and performance of two companies will be greater than the sum of the separate individual parts (joint venture)