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Free lecture material

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1. P&L

How to explain a Profit & Loss

During a Thanksgiving chat with family and friends, how would you explain the P&L of a company you are interested in? You do want to impress your uncle, who works as a banker at Goldman Sachs, but don’t want to bore the other people sitting at the table.

To explain it, try to split the P&L into the 3 main segments: sales, cost of sales, and expenses. The difference is Net Income. Use the % of sales ratios in your discussion.

See the short video on how to read a P&L here:

 

 

 

 

 

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2. Collect Faster and Pay later (BS)

1 Due to the launch of a new product, your company is low in cash. You have been asked to reduce Accounts Receivables, increase Accounts Payable, or both.

Please design a strategy including offering cash discounts to customers who pay in advance, letting small businesses pay with a credit card (quantify what would be the cost of accepting credit cards), and/or delaying payments to Suppliers (quantify what would be the cost of foregone cash discounts and/or destroying goodwill).  

2 Many customers want to have the new products, but you dont have enough of it. Would you prioritize old customers or new customers?

 

 

 

 

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2. Customer Prioritization (BS)

Your company launched an upgrade to your most popular product. Demand exceeds the Inventory or stock of products you have.

You can supply only 50 customers. 100 of them want to place an order. That includes:

  • 48 new clients. Some of those clients you have been trying to get for them for the last ten years. This is your only chance to get these new clients.
  • 48 old clients. They have been with your firm since the beginning. They will be offended if they don’t get it. One of them is a buyer you see when you go watch your niece’s soccer games, she is always there.
  • One new client and one old client who is nice. They will understand if they don’t get it.

Whom should you prioritize?

 

 

 

 

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3. Pricing

Your company asked executives like yourself to comment on whether to increase, decrease, or make no changes to pricing. Please share your comments below.

Background

Cost: a reduction in production capacity and foreign exchange has resulted in an overall cost increase of 30%.

Government regulations: a regulatory change has reduced how many consumers can buy the product at any given time by 50%.

Consumer demand: sales dropped last year. They have recovered some.

Profitability: the profitability of products varies from -20% (some products are sold at a loss) to +80%.

Please share your thoughts below on what to do about pricing. 

See a short video about this session here:

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4. Foreign Exchange & Sales Growth

Option 1. Taking advantage of Foreign Exchange

Many global companies hold global meetings for their executives. While working at Tetra Pak, one session I attended made it to the Guinness world of records (see here) by being the largest ice village.

Your company organizes an annual event for 100 executives. The budget is 1 million dollars for three days. This includes all traveling expenses, hotels, meals, and entertainment. It works out to $10,000 per executive.

The executives are coming from

30% North America

30% Europe & Middle East

30% Asia

10% Oceania & Pacific

Some executives mentioned that we should take advantage of the currency’s depreciation in Europe, Japan, Turkey, Argentina, and other countries and hold the meeting there instead of in New York.

Prepare a recommendation showing how we could save on the cost by hosting the convention in a location other than New York. Focus on the depreciation of other currencies compared to the dollar for the last three years.

 

Option 2

Explaining Sales growth

Worried you will lose your job to a robot or AI? While computers can process billions of simultaneous transactions, humans are better at understanding relationships and storytelling.

 Instructions

  • Prepare a table to explain sales growth versus a prior period. You can use any period you like.
  • Identify the four most relevant growth drivers for the two periods you are comparing. Use that if your company provides the impact due to volume, pricing, foreign exchange, etc. It’s the preferred option.
  • If they don’t, use what they provide (don’t make up the numbers). Examples include:

Regions (e.g., China, India, Europe, or North America),

Business units (e.g., skincare, cosmetics).

Pick four drivers, not 2, 3, 6, or 7. You can then use the template provided and save a lot of time.

Tips

  • Get the data the way that the company shows. If they show it by region, use regions. If they show it by categories, use categories.
  • Pick a period for which more data is available (the annual report has the most data). Don’t compare periods impacted by exceptional events such as the pandemic, and skip all comparisons to 2020 (don’t compare 2020 vs. 2019, 2021 vs. 2019 is better). Don’t mix drivers: if you grab from the annual report the drivers by region, don’t mix it with drivers by product. Pick one or the other.

 

See a short video about this session here

 

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5. Marketing Payback

The executives of your company met. They are organized in 3 regions: Americas (South & North), Europe, and Asia/rest of the world. This year, there is a limited amount of money that can be spent on Marketing. Pick one of the regions, and justify why your region should be funded, instead of the others.

If your strategy includes new launches, please calculate the payback and mention it on your comments.

Payback details to be included

  1. What is the business idea? 
  2. Revenue & Cost: estimate the cost to make, sales price, and revenue for 3 years
  3. How are you going to sell it/launch it?
  4. Why would consumers buy it? and Where are you going to sell it?
  5. How much do you need to invest?

 

See a short video about what we learned in this session here:

 

 

 

 

 

 

 

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