Math Case Prep

Consulting Case Interview Math Practice – Everything You Need to Know 29/04/2020, 19:42
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Case Interview Math –

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! Last Updated April, 2020
Table of Contents
https://www.myconsultingoffer.org/case-study-interview-prep/math/ Page 1 of 21
Why Do Case Consulting Market

Consulting Interview Math Sizing
Case Math: 4 Examples Math
InterviewersTypes of
Care about Problems
Math Skills
When
Everyone
Has a
Calculator
in their
Phone?
4 Steps to More Critical Links to

Minimizing Consulting Numbers Bain, BCG
Mistakes Math: to Know and
in Case Extracting for Case McKinsey
Interview Data from Math Resources
Math Chart Problems on
Consulting
Interview
Math
Are you nervous about solving math

problems in the middle of your consulting
interview?
Don’t worry. You’re not alone.
Luckily, typical case interview math

problems aren’t hard. They’re basic algebra
– addition, subtraction, multiplication,
division, and fractions/percentages. They
can also involve extracting data from tables
and interpreting it. All the math you need
you covered by age 13–and if you need to
brush up, we’ve got you covered.
You’ll find consulting math easier if you

know what type of problems to expect and
follow our 4-step approach to minimizing
case interview math mistakes.
If this is your first visit to

MyConsultingOffer.org – head to Case
Interview Prep for an intro to the
management consulting interview process.
If you’re familiar with what a consulting

case interview is, and want a preview of the
math you’ll need to succeed in consulting
interviews, you’re in the right place.
Let’s get started!
Why Do Consulting
Case Interviewers Care
about Math Skills When
Everyone Has a
Calculator in their
Phone?
Imagine you’re sitting around a conference

table with your case team and client
discussing how to solve the client’s business
problem. You might be trying to figure out
where to look for cost cuts that could
improve the client’s profitability:
Example: A manufacturing company wants

to improve it’s profit margins to 20%.
Should we start by focusing on operations
or research and development to find costs
that can be cut to achieve this goal?
Or you might be discussing which new

market will give the company the revenue
growth they want to achieve.
Example: Should a North-American-based

laundry detergent company launch their
product into the European or Latin
American market to find an incremental
$20 million in revenue?
There are qualitative issues to consider

when addressing either of these questions,
such as what are the business risks related
to cutting costs in operations vs. R&D? Or

what does competition look like in Europe
vs. Latin America?
But answering these qualitative questions

will require research and discussion. Simple,
back-of-the-envelope calculations can often
ensure this research and discussion are
worthwhile.
Why Do Case Math? Because A

Consulting Team’s Time Is
Expensive.
This is important because a week of a

consulting team’s time costs a lot of money.
Doing a quick calculation to make sure the
team is pursuing a strategy that will solve
the client’s problem is important.
Example: Can we save enough money in

either operations or R&D to meet our profit
margin targets?
If a quick calculation shows that R&D

expenses are only 20% of operations
expenses and that you would need to cut
the department entirely to reach the
margin improvement goal, that tells the
team that the team should first focus on
cost improvement in the larger operations
budget.
Example: Is the laundry detergent market

in Europe large enough that we could meet
our revenue goal of $20 million by entering
it? How about Latin America?
If the Latin American market for laundry

detergent is not large enough to support a
new competitor capturing $20 million in
revenue, then focus should first be given to
the European market. This type of
assessment can quickly ensure the team
focuses its efforts on a solution that’s likely
to have a positive outcome.
Consulting Math: 4
Types of Problems
1. Market sizing
Examples: What is the size of the

market for laundry detergent in Latin
America? How many pizza pies are
consumed each day in Pittsburgh?
2. Financial calculations
Examples: What are XYZ company’s

profits? What is XYZ company’s profit
margin? What is XYZ company’s
market share? What is XYZ company’s
growth rate?
3. Investment analysis
Example: How many years would it
take to break-even on an investment?

What is the return on investment?
4. Operations problems
Example: What is the capacity (of a

factory, machine or worker)? What is
the utilization rate?
Watch this video to learn how to master

case interview math. For reference, I’ll also
provide key formulas and examples below.
22:24
Case Interview Math

Examples
Financial Calculations
Here are the key formulas you need to

know:
Profits = Revenue – Costs

Profit margin = Profits/Revenue
Market share = Revenue for XYZ
company/Revenue for all companies
in the market
Growth rate = (New – Old) /Old
So Revenue growth rate = ( this year’s

revenue – last year’s revenue) / last year’s
revenue
Here are some examples of financial math

calculations:
A firm with $100 million in revenue

and $80 million in costs has profits of
$20 million.
A firm with $20 million in profits and
$100 million in revenue has a 20%
profit margin.
A firm with $100 million in revenue in DISCOVER HOW YO
an industry with $400 million CAN GET A JOB IN
revenues has a 25% market share. CONSULTING
A firm that made $100 million this
year and $90 million last year had an Schedule a free call with a f
11% growth rate. McKinsey, Bain, or BCG rec

to find out more.
Investment Analysis
SCHEDULE A FREE CA

know:
Break-even: Investment cost / annual

profit = years to break even
Return on investment (ROI) =
(Revenue – investment costs) /
Investment cost
Here are some examples of investment

calculations:
A company spends $10 million in costs

to enter a business with annual profits
of $1 million has a 10-year payback.
A company that will earn $12 million
on a business that it paid $10 million
to enter had a 20% ROI.
Operations Problems

know:
Capacity in units = total capacity /

capacity required to make one unit
Utilization rate = actual output /
maximum possible output
Here are some examples of operations math

calculations:
If a machine that can produce a

widget every 5 minutes, it has a
capacity of producing 96 widgets
in an 8-hour shift. 8 hours * (60
minutes/hour) / 5 minutes = 96.
If the widget machine is left
unmanned while the operator is at
lunch (1 hour) and during breaks (2,
15 minutes each), then the
machine will only make 78
widgets. 78 widgets / its capacity of
96 means it ran at a utilization rate
of 81.25%.
Market Sizing Math
When Davis, founder of My Consulting Offer,

was preparing for his interviews, he
frequently practiced his market sizing skills
at dinner. One night, his friend challenged
him to estimate the number of potential
bachelors available for her. In this article on
Market Sizing Questions, Davis walks step-
by-step through his assumptions. Here, he
walks through the actual calculations:
My friend attended college with me. She

was a non-American student and I knew
she wanted to marry someone who could
give her American citizenship, so I started
with the US population – 320 million.
Then I cut the population in half to focus on

men since she was interested only in men.
320 million / 2 = 160 million.
To rule out men who were too old or too

young for her, I cut the population of men
into age groups. The average life
expectancy in the U.S. is 80 years. I
wanted to focus on only men 20-30, so 1/8
of the U.S. male population. 160 million / 8
= 20 million.
I also wanted to focus on men that were

taller than her, but actually, my friend is
pretty short. Almost all men in the right age
range are taller than her so there was no
need to factor that into my calculation. Men
20-30 who are taller than Davis’s very
short friend = 100% or 20 million.
Next, I looked at attractiveness: both the

portion of the target male population that
my friend would find attractive and the
percentage of those guys who would find
her attractive.
This friend’s pretty picky. She was only

interested in guys who were 9’s or 10’s on a
scale of 1 to 10, so about 20% of the
population. 20 million men aged 20-30 *
20% who are really hot = 4 million.
I decided to be conservative and assume

only 10% of the population my friend
thought was attractive would also find her
attractive. 10 % of the 4 million hot guys
age 20-30 would find her attractive =
400,000.
My friend wanted a guy that had a good

income, so I decided to focus on people
attending or who’d graduated from college.
In fact, she was really picky, so I decided to
focus on top colleges like the Ivy League
schools. About 1% of the U.S. male
population attends highly competitive
schools like the Ivy League. 400,000 * 1% =
4,000.
Finally, I assumed many of the guys who

were in the right age range and who my
friend found attractive and who found her
attractive and who went to a top college
might already be taken. I cut the number I’d
come up with in half to reflect the highly
eligible guys who were already off the
market. 4,000 hot, really smart guys age
20-30 / 2 = 2,000.
My “so what” based on this analysis was

that my friend might want to be a little less
picky. All her requirements brought the
number of eligible bachelors down from 160
million to only 2,000. But she thought that a
group of 2,000 guys was plenty for her to
find Mr. Right in, so she decided to keep her
standards high.
4 Steps to Minimizing
Mistakes in Case
Interview Math
It’s hard to do math under the pressure of

an interview. These steps are the key to
keeping your math accurate.
1. Be clear on what the

calculation will tell you.
Don’t just start doing calculations.

Know what business problem you’re
trying to solve and how your math will
give you insight so you can make a

decision. Share this with your
interviewer.
2. Structure your approach.
Before you do any calculation, walk

through the steps you’ll take to
answer the question with your
interviewer. There are frequently
several steps in consulting math
problems.
3. Do the calculation step-by-

step.
Once you have your approach to the

case math problem, do one
calculation at a time to ensure
accuracy.
4. Explain the “So what?”

Don’t wrap up your answer with just a
number, explain what the number
means in the context of the business
problem you were trying to solve.
What would you recommend to the
client?
Here’s an example of Consulting

Math:
A manufacturer of high-quality wood

outdoor furniture is considering extending
its product line to include Adirondack
chairs. It only wants to enter the market if it
can make at least $5 million a year.
Data provided:
The size of the North America market for

Adirondack chairs is estimated to be $1
billion. The top 4 players hold 20% market
share between them. Profit margins
average 20%.
Now apply the 4-step approach for

minimizing mistakes.
1. Be clear on what the calculation will

tell you. “I’d like to calculate likely
market share and profit our client
could expect if it entered the market
for Adirondack chairs in order to see if
the opportunity is large enough to
meet their criteria of $5 million
profits.”
2. Structure your approach. “To do this

calculation, I’d first look at the likely
market share our client could achieve
based on the share of the top 4
players in the market. Then I’d
calculate the revenues that they could
expect by multiplying the market
share by the size of the market. I’d
then use the industry’s average profit
margin to calculate the level of profit
they could expect.”
3. Do the calculation step-by-

step. “The top 4 players in the
market for Adirondack chairs
have a combined market share
of 20%. 20% market share /4
players = an average market
share of 5%. Based on the

client’s success in the wood
outdoor furniture market, we
expect they could achieve this
level of market share as well.”A
5% market share in a market
with $1 billion in annual revenue
would give the client $1 billion *
.05 or $50 million in revenue.$50
million in revenue for a product
with a 20% profit margin would
give the client $10 million in
expected revenue.”
4. Explain the “So what?” “Based

on these calculations, the client
should consider entering the
market for Adirondack chairs
because the expected annual
revenue of $10 million exceeds
their minimum criteria of $5
million.”
More Case Interview

Math: Extracting Data
from Charts
In some cases, particularly when a case

interview math problem is one step in a
multi-step case question, an interviewer
might hand you a chart with key
information on it. These charts often have
more pieces of data on them than you need.
You need to find the right data. Or, you may
need to manipulate the data to find what
you need.
For example, a table might provide a

company’s costs and revenues when the
information you need is profit margin. Or, it
might provide the revenues of the top 4
companies in the market and a 5th number
that totals the revenue of all other players in
the market, but you might need market
share for player #3.
Don’t let all the number on the chart throw

you. You’ll still be using the same basic
formulas to analyze these numbers.
Instead, take a minute to understand the

information the chart provides and explain
it to your interviewer. Then proceed with the
case interview math problem as described
above: be clear about what you’re looking
for in the calculation, walk the interviewer
through your approach, do the actual
calculation, and then provide the “so what.”
Using this approach will make interpreting
data tables in an interview straightforward.
Critical Numbers to Know for Case

Math Problems
Links to Bain, BCG & McKinsey

Resources on Case Interview Math
Want to hear more about the importance of

case interview math straight from the top
management consulting firms? Bain and
BCG list quantitative analysis as part of what
they test for. McKinsey provides examples of
the type case math in its case interviews in
this practice test.
On this page, we’ve covered the typical

types of case interview math problems
you’ll see, explained how to extract data
from charts, and provided tips on
minimizing your consulting math mistakes.
These skills will help boost your confidence
in management consulting interviews and
ensure you ace your case.
People who are working on their consulting

math skills typically find the following other
My Consulting Offer pages helpful:
Market Sizing Questions discusses a

type of case study interview question
that always tests math skills.
Types of Consulting Case
Interviews provides an overview of all
the types of cases you can expect to
see.
Case Interview Examples provides
example cases you can use to
practice.
Case Interview Practice provides tips
to make your practice time as
efficient as possible.
We hope this page has increased your

confidence in tackling consulting math
problems! Comment below on the types of
consulting math problems you find the
toughest. We’ll provide tips from our
coaches.
Help with Case Study

Interview Preparation
Thanks for turning to My Consulting Offer

for advice on case study interview prep. My
Consulting Offer has helped almost 85%
of the people we’ve worked with to get a
job in management consulting. For
example, here is how Brenda was able to
get a BCG offer when she only had 1 week to
prepare…
2:02
We want you to be successful in your

consulting interviews too.
If you want to learn more about how to ace

your case interviews, schedule a free call
with a member of our team. We’ll show you
how you get an offer without spending
hundreds of hours preparing.
Schedule Your Free Call
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Consulting Case Interview Math Practice – Everything You Need to Know 29/04/2020, 19:42

My CONSULTING Our Process Our Reviews " Login

Case Interview Math –

! Last Updated April, 2020

Why Do Case Consulting Market

4 Steps to More Critical Links to

Are you nervous about solving math

Don’t worry. You’re not alone.

Luckily, typical case interview math

You’ll find consulting math easier if you

If this is your first visit to

If you’re familiar with what a consulting

Let’s get started!

Imagine you’re sitting around a conference

Example: A manufacturing company wants

Or you might be discussing which new

Example: Should a North-American-based

There are qualitative issues to consider

to cutting costs in operations vs. R&D? Or

But answering these qualitative questions

Why Do Case Math? Because A

This is important because a week of a

Example: Can we save enough money in

If a quick calculation shows that R&D

Example: Is the laundry detergent market

If the Latin American market for laundry

Examples: What is the size of the

Examples: What are XYZ company’s

Example: How many years would it

take to break-even on an investment?

Example: What is the capacity (of a

Watch this video to learn how to master

Case Interview Math

Here are the key formulas you need to

Profits = Revenue – Costs

So Revenue growth rate = ( this year’s

Here are some examples of financial math

A firm with $100 million in revenue

11% growth rate. McKinsey, Bain, or BCG rec

Here are the key formulas you need to

Break-even: Investment cost / annual

Here are some examples of investment

A company spends $10 million in costs

Here are the key formulas you need to

Capacity in units = total capacity /

Here are some examples of operations math

If a machine that can produce a

Market Sizing Math

When Davis, founder of My Consulting Offer,

My friend attended college with me. She

Then I cut the population in half to focus on

To rule out men who were too old or too

I also wanted to focus on men that were

Next, I looked at attractiveness: both the

This friend’s pretty picky. She was only

I decided to be conservative and assume

My friend wanted a guy that had a good

Finally, I assumed many of the guys who

My “so what” based on this analysis was

It’s hard to do math under the pressure of

1. Be clear on what the

Don’t just start doing calculations.

give you insight so you can make a