McKinsey Problem Solving Test

 
Sample McKinsey PST

igotanoffer.com  
 
 
     
 
 
 
 

Sample McKinsey PST

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

Copyright © 2015 IGotAnOffer Ltd.

Instructions
This  practice  test  contains  9  questions  and  we  recommend  you  take  20  minutes  to  
complete  it.  The  actual  test  contains  26  questions  and  you  will  be  given  60  minutes  to  
answer  as  many  questions  as  possible.  This  test  assesses  your  ability  to  solve  business  
problems  using  deductive,  inductive  and  quantitative  reasoning.  

While  completing  this  practice  test  do  NOT  use  any  electronic  devices  such  as  a  calculator  
or  computer  when  performing  the  calculations  to  answer  the  questions.  Electronic  devices  
will  NOT  be  permitted  during  the  actual  test  administration.    

We  also  recommend  you  only  use  the  blank  space  in  this  booklet  to  assist  you  in  
performing  any  calculations  and  recording  any  notes.  Indeed,  NO  scratch  paper  will  be  
allowed  during  the  actual  test  administration.  

You  will  be  presented  with  a  scenario  based  on  a  real  business  case.  Information  related  to  
each  scenario  will  be  shown  in  text,  tables  and  exhibits.  This  information  is  presented  in  
shaded  areas  and  is  distributed  in  sections  throughout  the  scenario.  The  questions  ask  you  
to  find  the  most  appropriate  answer  to  the  problem  as  described  using  only  the  
information  presented.  You  should  select  one  and  only  one  answer  to  each  question.  

This  practice  test  begins  on  page  4  of  this  booklet.  Only  consider  information  contained  
within  the  scenario  when  determining  your  answer.  Considering  all  information  presented  
within  the  scenario  is  critical  to  answering  questions  correctly.    

After  completing  the  test,  score  your  answers  using  the  answer  key  located  at  the  end  of  
this  booklet.  Add  the  number  of  correct  answers  to  determine  your  final  score.  

   

Copyright © 2015 IGotAnOffer Ltd. 2

Answer sheet
Circle  your  answer.  

Q1   A   B   C   D  
Q2   A   B   C   D  
Q3   A   B   C   D  
Q4   A   B   C   D  
Q5   A   B   C   D  
Q6   A   B   C   D  
Q7   A   B   C   D  
Q8   A   B   C   D  
Q9   A   B   C   D  
 

Copyright © 2015 IGotAnOffer Ltd. 3

Energy Data
 
 
Energy  Data  is  a  provider  of  news,  data  and  analysis  on  the  energy  industry.  It  sells  a  variety  of  
market  reports  and  databases  on  the  energy  sector  directly  to  customers  such  as  governments,  
financial  institutions  and  industrial  players  that  need  information  and  analysis  on  the  energy  
market.    
 
Energy  Data  analysts  are  based  in  offices  around  the  world.  They  collect  data  and  write  reports  
about  different  subsectors  of  the  energy  market.  Elements  covered  by  the  reports  include  the  
investment  trends  in  the  energy  market,  the  market  share  of  its  different  players,  the  new  
technologies  developed,  the  policies  that  are  emerging  etc.  Energy  Data’s  reports  are  bundled  in  
products  that  cover  different  subsectors  in  the  energy  industry  including:  oil  extraction  and  
refining,  gas  extraction  and  processing,  coal  mining,  biofuels  production,  solar  energy,  wind  
energy  etc.    
 
Clients  typically  subscribe  to  these  different  products  for  a  yearly  fee  and  get  access  to  all  the  
information  published  on  the  themes  they  paid  for  on  Energy  Data’s  website.  Energy  Data  has  
historically  had  three  main  types  of  clients:  governments,  financial  institutions  and  energy  
companies.    
 
Energy  Data’s  sales  representatives  identify  prospective  clients  either  through  internet  searches  
or  during  industry  conferences.  Once  identified,  prospective  clients  are  contacted  via  email  or  on  
the  phone  and  offered  to  trial  Energy  Data’s  service  for  free  for  a  short  period  of  time.  Users  who  
find  they  need  the  information  published  in  the  reports  usually  decide  to  pay  an  annual  fee  to  
continue  to  have  access  to  Energy  Data’s  products.  The  sales  cycle,  between  the  first  contact  with  
the  prospective  client  and  the  signature  of  the  subscription  contract,  can  last  up  to  one  year.  
 
The  company  was  founded  in  2000  and  managed  to  acquire  a  strong  brand  in  the  energy  industry  
and  a  reputation  for  high  quality  market  reports  in  a  very  short  time.  It  has  enjoyed  strong  
revenue  growth  since  its  creation  but  has  never  been  profitable  so  far.  The  growth  of  the  company  
was  entirely  financed  by  its  owner  and  founder  until  2010  when  the  company  was  acquired  by  the  
information  conglomerate  Big  Intel  with  the  objective  to  make  it  profitable.    
   
Exhibit  1:  Revenue  and  profit  margin  for  Energy  Data,  2006-­‐10  
Year   2006   2007   2008   2009   2010  
Revenue  
21   39   71   97   125  
($  million)  
Profit  
-­‐150%   -­‐128%   -­‐76%   -­‐52%   -­‐25%  
margin  (%)  
 
The  CEO  of  Energy  Data  has  hired  you  to  help  him  identify  ways  to  become  profitable  quickly  
while  maintaining  revenue  growth.  He  tells  you:  “We  have  never  been  profitable  so  far.  In  the  past  
we  have  always  invested  a  lot  in  new  products  to  guarantee  future  revenue  growth.  But  now  that  
Big  Intel  has  acquired  us,  we  are  going  to  need  to  become  profitable  very  quickly  -­‐  the  
management  of  Big  Intel  made  it  very  clear  to  me.”  
 
 
 

Copyright © 2015 IGotAnOffer Ltd. 4

1. Which  of  the  following  statements  best  reflects  the  CEO’s  objective?  
 

A) The  CEO  wants  to  reduce  investment  in  the  development  of  new  products  to  increase  the  
company’s  profit  margin    
 

B) The  CEO  wants  to  shift  the  focus  of  the  company  from  high  revenue  growth  to  becoming  
profitable  rapidly  
 

C) The  CEO  wants  to  cut  costs  while  maintaining  revenue  growth  in  order  to  increase  the  
company’s  profit  margin  
 

D) The  CEO  wants  to  preserve  the  company’s  revenue  growth  and  become  profitable  over  the  
next  year  
 
2. Which  of  the  following  statements  is  valid  based  on  the  data  in  Exhibit  1?  
 

A) The  cumulated  revenue  between  2006  and  2010  was  $346  million  
 

B) The  costs  of  Energy  Data  were  the  highest  in  2006  
 

C) The  losses  of  Energy  Data  were  higher  in  2008  than  in  2009  
 

D) The  costs  of  Energy  Data  were  approximately  $79  million  in  2007  
 
3. Which  of  the  following  would  be  LEAST  helpful  for  your  team  to  analyse  with  regard  to  the  
current  profit  margin  of  the  company?  
 

A) The  profit  potential  for  each  product  offered  by  Energy  Data  
   

B) The  company’s  labour  costs  by  office  and  product  lines  

 

C) The  company’s  costs  related  to  buying  office  supplies  and  computers  for  employees  
 

D) The  profitability  of  Energy  Data’s  main  competitors  and  of  the  industry  as  a  whole  
 
 
Your  team  decides  to  look  into  the  revenues  and  costs  generated  by  each  of  the  company’s  
products  last  year  and  interviews  Energy  Data’s  Head  of  Products  to  get  the  information  needed.  
The  Head  of  Products  tells  you  he  has  recently  done  a  similar  analysis  and  provides  you  with  
Exhibit  2.  
 
Exhibit  2  shows  the  revenues  ($  million)  generated  by  each  product  in  2010  as  well  as  the  number  
of  analysts  working  on  each  product.  All  analysts  work  full-­‐time  on  one  product  only.  
   
Exhibit 2
Revenue Number of analysts
Product L 5 Product L 10
Product K 9 Product K 18
Product J 1 Product J 10
Product I 1 Product I 8
Product H 2 Product H 9
Product G 2 Product G 10
Product F 23 Product F 45
Product E 28 Product E 60
Product D 9 Product D 28
Product C 8 Product C 19
Product B 34 Product B 50
Product A 3 Product A 17
 
       

Copyright © 2015 IGotAnOffer Ltd. 5

  
4. Based  on  the  information  provided  in  Exhibit  2,  which  of  the  following  is  a  valid  conclusion?  
 

A) 51%  of  the  revenues  are  generated  by  the  two  highest  selling  products  
 

B) Analysts  working  on  Product  F  generate  more  revenue  per  head  than  analysts  working  on  
product  E  
 

C) Product  B  is  the  most  profitable  product  

 

D) An  analyst  working  on  Product  K  generates  more  revenue  than  one  working  on  Product  L  
on  average  
 
5. Which  of  the  following  statements,  if  true,  LEAST  explains  the  difference  in  revenues  between  
Product  E  and  Product  G  in  Exhibit  2?  
 

A) Product  E  covers  a  more  established  and  larger  market  than  Product  G  

 

B) In  2010,  customers  who  usually  buy  Product  G  have  been  in  financial  trouble  
 

C) The  analysts  working  on  Product  G  have  less  experience  than  the  analysts  working  on  
Product  E  
 

D) Product  G  has  been  launched  three  years  after  Product  E  

 
6. How  should  products  A  to  E  be  ranked  according  to  the  revenue  generated  per  analyst,  from  
highest  to  lowest?  
 

A) B,  E,  C,  D,  A  

 

B) B,  E,  C,  A,  D  

 

C) B,  C,  E,  D,  A  

 

D) E,  B,  D,  C,  A  

 
7. If  total  revenue  in  Exhibit  2  were  to  grow  by  5%  annually  in  the  future  and  revenue  from  
Product  B  were  to  grow  by  10%  every  year,  which  of  the  following  would  be  the  MINIMUM  time  
period  required  to  see  Product  B  represent  more  than  half  of  the  total  revenue?  
 

A) 10  years  
 

B) 15  years  
 

C) 20  years  
 

D) 25  years  
 
8. What  is  the  average  revenue  per  analyst  for  Energy  Data’s  products  based  on  the  information  
provided  in  Exhibit  2?  
 

A) $48,000  
 

B) $480,000  
 

C) $440,000  
 

D) $400,000  
 
   

Copyright © 2015 IGotAnOffer Ltd. 6

  
After  analysing  Energy  Data’s  product  mix,  your  team  turns  its  attention  to  the  sales  force  of  the  
company  and  decides  it  would  be  a  good  idea  to  analyse  how  the  market  reports  written  by  the  
analysts  are  sold.  Energy  Data’s  Head  of  Sales  tells  you  that  his  teams  are  organised  
geographically.  Each  sales  representative  is  responsible  for  managing  existing  clients  and  for  
acquiring  new  ones  in  their  defined  sales  territory.    
 
The  Head  of  Sales  gives  your  team  some  information  about  how  the  salary  of  sales  representatives  
is  structured:  
 
§ Basic  salary:  sales  representatives  receive  a  basic  salary  (B)  every  year  independently  of  
their  annual  sales  performance.  This  guarantees  them  a  minimum  salary  in  case  of  an  
economic  downturn.  
 
§ Existing  clients’  bonus:  sales  representatives  manage  a  number  of  existing  clients  (EC)  and  
receive  2%  of  the  annual  value  generated  by  the  existing  clients  they  manage  every  year.  An  
average  existing  client  spends  (ES)  on  Energy  Data’s  products  per  year.  
 
§ New  clients’  bonus:  sales  representatives  acquire  a  number  of  new  clients  (NC)  every  year  
and  receive  20%  of  the  revenue  generated  by  these  clients  in  their  first  year.  An  average  new  
client  spends  (NS)  on  Energy  Data’s  products  in  his  first  year.  
       
The  Head  of  Sales  also  tells  you  he  is  not  sure  that  having  his  team  organised  in  geographical  
territories  is  the  best  solution  because  that  means  each  sales  representative  has  got  to  know  how  
to  sell  all  of  Energy  Data’s  12  products  which  is  very  challenging  as  they  are  all  very  different  and  
quite  complex  products.  He  is  thinking  of  reorganising  his  teams  by  type  of  products  instead  to  
contribute  to  the  company’s  effort  to  become  profitable.  In  this  new  organisation  he  would  have  
12  teams,  each  focused  on  selling  one  product  only  worldwide.    
 
 
 
9. Which  of  the  following  formulae  calculates  the  hourly  salary  of  a  sales  representative  working  8  
hours  a  day,  5  days  a  week  and  47  weeks  a  year?  
 

A) (B  +  (ES  x  EC)  x  2%  +  (NS  x  NC)  x  20%)  /  (8  x  5  x  47)  

 

B) (B  +  (ES  x  EC)  x  (1  -­‐  2%)  +  (NS  x  NC)  x  (1  -­‐  20%))  /  (8  x  5  x  47)  
 

C) (B  +  (ES  +  EC)  x  20%  +  (NS  +  NC)  x  2%)  /  (8  x  5  x  47)  

 

D) (B  +  (ES  x  EC)  /  2%  +  (NS  x  NC)  /  20%)  x  (8  x  5  x  47)  

 
 

 
 
 
   

Copyright © 2015 IGotAnOffer Ltd. 7

Answer key
1. B  –  The  CEO  stated,  “we  are  going  to  need  to  become  profitable  very  quickly”  and  “in  the  past  we  
have  always  invested  …  to  guarantee  future  revenue  growth”.  Option  B  is  the  only  answer  that  
summarises  the  CEO’s  aims  to  shift  the  focus  from  revenue  growth  to  profitability  and  to  do  so  
quickly.    The  other  answers  are  either  not  complete  or  not  fully  accurate.  
 
2. C  –  Exhibit  1  shows  that  in  2008  revenues  were  at  $71  million  and  the  profit  margin  at  –76%.  
This  implies  that  the  business  made  a  loss  of  $54  million  (-­‐76%  x  $71  million).  In  addition,  the  
loss  in  2009  was  $50  million  (-­‐52%  x  $97  million).  Losses  were  therefore  higher  in  2008.  
 
3. A  –  Options  B,  C  and  D  are  all  related  to  the  current  profitability  of  the  company.  Option  A  is  the  
least  relevant  at  hand  as  it  is  only  related  to  the  potential  profitability  of  the  company.  
 
4. B  –  There  are  45  analysts  working  on  Product  F  and  they  generate  $23  million,  which  is  
approximately  $511,000  each  on  average.  Similarly,  there  are  60  analysts  working  on  Product  L  
and  they  generate  $28  million,  which  is  approximately  $468,000  each  on  average.  The  other  
options  are  either  false  or  cannot  be  concluded  based  on  the  information  provided  in  Exhibit  2.  
 
5. B  –  Option  B  only  refers  to  the  performance  of  Product  G.  It  does  not  refer  to  the  relative  
performance  of  Product  G  and  Product  E.  Options  A,  C  and  D  could  all  partly  explain  why  there  is  
an  important  difference  in  revenue  between  Product  G  and  Product  E.  
 
6. A  –  Calculating  the  revenue  per  analyst  gives  you  Product  B  =  34/50  =  0.68,  Product  E  =  28/60  =  
0.46,  Product  C  =  8/19  =  0.42,  Product  D  =  9/28  =  0.32  and  Product  A  =  3/17  =  0.17.  
 
7. B  –  Product  B  accounts  for  27%  of  the  total  revenues  today  (34  /  125  =  27%).  Product  B  is  
growing  at  5%  faster  annually  than  the  total  revenue.  In  order  reach  50%  of  revenue;  Product  B  
would  need  to  roughly  double  in  size.  Doubling  in  size  takes  about  14  years  at  a  5%  growth  rate  
according  to  the  rule  of  72  (72  /  5  =  14.4).  The  minimum  time  required  is  therefore  15  years.  
 
8. C  –  Exhibit  2  shows  that  the  combined  revenue  generated  by  all  products  is  $125  million.  There  
are  a  total  of  284  analysts  working  on  all  the  products.  The  average  revenue  per  analyst  is  
therefore  $440,000  ($125  million  /  284  analyst  =  $0.440  million  per  analyst).  
 
9. A  –  According  to  the  description  provided,  there  are  three  components  to  the  annual  salary:  the  
basic  salary  (B),  the  bonus  for  existing  clients  (this  is  (ES  x  EC)  x  2%)  and  the  bonus  for  new  
clients  (this  is  (NS  x  NC)  x  20%).  The  hourly  wage  can  be  obtained  by  adding  up  these  three  
components  and  dividing  the  total  by  the  number  of  hours  worked  in  a  year:  (B  +  (ES  x  EC)  x  2%  
+  (NS  x  NC)  x  20%)  /  (8  x  5  x  47).  

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