Management Consulting Case Interview Formulas

Return On Investment (ROI)

= (Gain from Investment - Cost of Investment)/(Cost of Investment)

Breakeven Formula

1. Units to Breakeven: Total Fixed Costs = (Price Volume) - (Variable Cost Volume); solve for volume

2. Price to Breakeven: Total Fixed Costs = (Price Volume) - (Variable Cost Volume); solve for price

3. Time to Breakeven: Total Fixed Costs = (Revenues per day/month/year) - (costs per day/month/year); solve for day/month/year

Profitability Formula

=Revenues - Costs

Revenues = (Price * Volume)

Costs = (Fixed Costs) + (Variable Costs * Volume)

Profit Margin or Net Margin

= (Profits)/(Revenues)

Gross Margin

= (Revenues - Cost of Goods Sold)/(Revenues)

Net Present Value (NPV)

= Initial Investment + (Cash Flow Year 1)/(1+discount rate) + (Cash Flow Year 2)/(1 + discount rate)^2 + ... +(Ultimate Cash Flow Year X)/(1 + discount rate)^x

Incremental Revenue Gain/Loss

(Revenues from new product/company/etc.) - (Revenues from old product/company/etc.)

Breakeven Market Share

= (Breakeven Volume)/(Total Market Size)

Return on Assets (ROA)

= (Net Income)/(Total Assets)

Return on Equity (ROE)

= (Net Income)/(Shareholders' Equity)

EBITDA

Earnings Before Income, Tax, Depreciation, and Amortization

Quick Ratio

= (Current Assets - Inventory)/(Current Liabilities)

Current Ratio

= Current Assets/Current Liabilities

Debt Ratio

= Total Debt/Total Assets

Debt-to-Equity Ratio

= Total Debt/Total Equity

Free Cash Flow (FCF)

= EBIT(1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital Expenditure

Future Value

=(Present Value)*(1 + i)^t

Present Value

=(Future Value)/(1 + i)^t

Perpetuity Formula

=(Cash Flow)/(discount rate - growth rate)

Price Elasticity of Demand

= (% Change in Quantity)/(% Change in Price)

Cross Elasticity of Demand

=(% of change in Quantity for Good X)/(% of change in Price for Good Y)

Payback Period

= Cost of Project/Annual Cash Inflows

Contribution Margin

= Price/Unit - Variable Cost/Unit