Terminology Flashcards
(60 cards)
Bottom-up (PrepLounge)
Start with the most detailed level of granularity and aggregating information upwards (as opposed to top-down)
Buttoned-up (PrepLounge)
Representing a high quality, accurate, bullet-proof piece of work which can be defended even under closest investigation
Elevator test, elevator pitch (PrepLounge)
Situation in which you need to give a top-down summary to a senior client or firm member within the duration of riding an elevator together
Granularity (PrepLounge)
Level of detail of an analysis
KPI, key performance indicator (PrepLounge)
Important metric to track business or progress
MECE (PrepLounge)
Mutually exclusive, collectively exhaustive - most often used in conjunction with structuring an issue so that the single buckets don’t overlap each other, but altogether fully describe the issue
Run the numbers (PrepLounge)
Create an Excel model to play through different scenarios, in practice regularly used to adjust your assumptions in such a way that they justify a predefined outcome
Top-down (PrepLounge)
Opposite of bottom-up, starting with the high-level view and breaking it into details
Top line vs. bottom line
Top line: company’s total revenue or gross sales (on top of the income statement)
Bottom line: company’s net income or profit margin (at the the bottom of the income statement
Scale effects
Changes in average costs that occur when production levels are increased or decreased.
Can be positive = economies of scale (cost per unit decreases as production increases).
Can be negative = diseconomies of scale (cost per unit increases as production increases).
Profit margin
Measures the profitability of a company.
Percentage of revenue that remains as profit after deducting all expenses. There are 3 main types: gross profit margin, operating profit margin, net profit margin (different card!).
3 main types of profit margin
GROSS PROFIT MARGIN:
Measures profitability of a company’s core operations before deducting overhead expenses (like rent, salaries, and marketing).
(Gross Profit / Revenue) x 100
> Gross Profit = Revenue - Cost of Goods Sold (COGS)
> COGS include direct costs of producing goods/services
OPERATING PROFIT MARGIN:
Measures the profitability of a company’s operations after deducting overhead expenses but before deducting interest and taxes.
(Operating Profit / Revenue) x 100
> Operating profit = Gross profit - operating expenses
NET PROFIT MARGIN:
Measures the overall profitability of a company after deducting all expenses, including interest and taxes.
(Net Profit / Revenue) x 100
> Net profit = revenue - all expenses
Total accessible market (TAM)
Estimated total revenue that a product/service could generate if it captured entire market opportunity. Measure of the maximum potential market size.
Key factors to consider: market size & growth, product penetration, pricing.
Can be estimated via top-down, bottom-up or market research.
Implications
Potential consequences or effects of a particular action, decision, or event. Can be positive, negative, or neutral.
Year-over-Year (YoY)
To compare data from one year to the previous year. Often used to track trends, assess performance, and identify growth or decline over time.
E.g.: if a company’s revenue increased by 10% YoY, it means that their revenue in the current year is 10% higher than it was in the previous year.
Management vs. strategy consulting
Management consulting:
Focus: Broad range of business operations, including finance, marketing, human resources, technology.
Scope: Provides solutions to specific problems or challenges within a company.
Tasks: Can involve process improvement, organisational restructuring, performance optimisation, risk management.
-> Management consultants are like doctors for businesses, diagnosing problems and prescribing solutions.
Strategy consulting:
Focus: High-level strategic planning and decision-making.
Scope: Helps companies develop long-term goals and strategies to achieve them.
Tasks: Involves market analysis, competitive analysis, business model development, and corporate restructuring.
-> Strategy consultants are like architects, designing the blueprint for a company’s future.
Top revenue
Highest amount of revenue generated by a company/organisation within a specific time period: annual, quarterly, monthly revenue.
Recession
Significant decline in economic activity spreading across the economy, lasting for more than a few months and causing widespread economic hardship.
Characterised by: negative GDP (Gross Domestic Product), increased unemployment, decreased consumer spending, business closures.
Can be caused by: financial crises, economic shocks, policy mistakes (too strict/loose).
Gross Domestic Product (GDP)
Total monetary value of all final goods and services produced within a country’s borders in a specific period of time (usually a year). Measures the overall economic activity of a nation.
-> GDP represents the total value of everything a country produces. This includes goods (like cars, food, and clothing) and services (like healthcare, education, and entertainment).
Implementation plan
Detailed roadmap outlining the steps necessary to put a proposed solution or strategy into action.
Key components: objectives, timelines, responsibilities, resources, risk assessment, contingency (Eventualität) planning.
Startup costs vs. operational costs
Startup costs are expenses incurred before a business begins operations. Typically one-time payments including: legal fees, rent or mortgage, equipment, inventory, marketing & advertising, professional fees (e.g. accounting, consulting, design).
Operational costs are ongoing expenses that a business incurs after it starts operating. These costs are recurring and include: rent or mortgage, utilities, salaries & wages, insurance, taxes, marketing & advertising, supplies.
Margin of error
Indicating range within which a result is likely to be accurate. It measures the degree of uncertainty in a sample statistic and is often expressed as a percentage.
Capital spend (vs. operating budget)
Expenditures (Kostenaufwand) made to acquire or improve long-term assets, such as property, plant, and equipment (PP&E). Assets are expected to provide benefits over multiple years.
E.g.: purchasing new machinery, expanding facilities, investing in R&D, making major renovations.
-> Investing in the future of the business.
Operating budget (vs. capital spend)
Financial plan outlining the expected revenues and expenses for a specific period (typically a year). It covers the day-to-day operations of a business.
E.g.: salaries & wages, rent or mortgage payments, utilities, marketing & advertising, inventory costs, supplies.
-> Managing the day-to-day finances of the business.
