Bcg finance formulas

Hi,

Here is a set of things you need to know:

1) Math and formulas:

• Interest rates calculations
• Compound margin
• NPV using the Rule of 72, Perpetuity
• CAGR using the Rule of 72
• Currencies exchange calculations
• Speed, time, distance calculations
• Equations, systems of equations
• Ratio & Proportions
• Little's Law
• Solving the problems by calculating the area of the triangle
• Profit / breakeven formula
• Correlations, outliers (being able to spot on the graphs, tables)

2) Fast math skills

• Rounding up and down
• Learn how to multiply double digit numbers (https://www.youtube.com/watch?v=6ndkkPZYJHo)
• Learn the division table up to 1/11 (i.e. 5/6 = 83.3)
• Learn how to work with zeros using powers (e.g.: 4000000 = 4*10ˆ6)

Use math tools (Mimir math for iOS), Math tool on Viktor Cheng website to practice

3) Working with tables and graphs and deriving conclusions

• Study "Say it with Charts" book
• Check all available MBB presentations and publications. Practice to derive conclusions and check yourself with the actual ones from the article / presentation
• GMAT IR part (Official guide and Manhattan prep)
• Learn basic statistics (Any GMAT or MBA prep guides)

Good luck!

Hi Anonymous,

these are the most common formulas I encountered/have been useful through my interview process at BCG:

• Breakeven point
• Rule of 72 (for quickly computation of compound rates)
• Perpetuity formula (for quick valuation estimates) and general NPV formula

I would not expect any interviewer to provide any of them in case you don’t know (or if they provide I don’t think they would move you to the next round).

Besides that, you should also be familiar with simple and compound interest, and could be useful to be updated on the main currency exchanges, oil and gold prices.

Finally would recommend reviewing the formulas for volume/surface of main solid figures (pyramid, cone, cylinder, sphere), which could be useful in market sizing cases.

Best,

Francesco

Dear A,

Here is some finance formulas you need to know:

• Break-even Calculation = Fixed Cost / Contribution Margin; Fixed Cost / (Price – Variable Cost)

• Debt Ratio = Total Debt / Total Assets

• Debt-to-Equity Ratio = Total Debt / Total Equity

• Four Cs (marketing from a customer’s point of view): Convenience, Cost to the user, Communication, Customer needs and wants

• Four Ps (starting or expanding a business): Product, Price, Place, PromotionGross Profit = Sales – Cost of Goods Sold
Gross Profit Margin = Gross Profit / Total Revenue

• Profit = Total Revenue – Total Costs
• Return on Assets = Net Income / Total Assets
• Return on Equity = Net Income / Shareholder’s Equity
• Return on Investment = Net Income / Initial Investment
• SWOT Analysis: Strengths, Weaknesses, Opportunities, ThreatsTotals Costs = Fixed Costs + Variable Costs
• Total Revenue = Price x Volume

Hope it helps,

Best,

André

Very interesting, for North America perspective I find requirements for financial knowledge to be wildly different from the ones outlined in other answers.

Unless you are an MBA, a finance major or worked in finance I do not expect any knowledge of the formulas - with the exception of NPV - and I will indeed explain the relevant formulas to you if needed. Also would never expect you to calculate the NPV of a series of cash-flows during an interview due to the computational heaviness of that.

Finally, the rule of 72 is a nice tool but if candidate uses it during the interview then I would ask the mathematical explanation behind it. If you don’t that would be detrimental. This because To be an excellent consultant is very important that you know and understand the tools that you use intimately and understand how they work, their limitations, etc. 

What I do expect is that you ace the basics like multiplications and divisions. I know, it sounds, well, basic, but if you have an hesitation on telling me what is 2% of 5M or calculate 0.6/9 that would be almost a non starter.

Finally when we do math I would like to see if you can get to the results in the simplest and fastest way possible. This will show me whether in a case you are trying to complicate things uneccessarely.

hope it helps,

Andrea

Hello!

Precisely for the high amount of questions (1) asked by my coachees and students and (2) present in this Q&A, I created the “Economic and Financial concepts for MBB interviews”, recently published in PrepLounge’s shop (https://www.preplounge.com/en/shop/prep-guide/economic_and_financial_concepts_for_mbb_interviews).

After +5 years of candidate coaching and university teaching, and after having seen hundreds of cases, I realized that the economic-related knowledge needed to master case interviews is not much, and not complex. However, you need to know where to focus! Hence, I created the guide that I wish I could have had, summarizing the most important economic and financial concepts needed to solve consulting cases, combining key concepts theorical reviews and a hands-on methodology with examples and ad-hoc practice cases.

It focuses on 4 core topics, divided in chapters (each of them ranked in scale of importance, to help you maximize your time in short preparations):

• Economic concepts: Profitability equation, Break even, Valuation methods (economic, market and asset), Payback period, NPV and IRR, + 3 practice cases to put it all together in a practical way. 
• Financial concepts: Balance sheet, Income statement/P&L and Performance ratios (based on sales and based on investment), +1 practice case
• Market structure & pricing: Market types, Perfect competition markets (demand and supply), Willingness to pay, Pricing approaches, Market segmentation and Price elasticity of demand, +1 practice case
• Marketing and Customer Acquisition: Sales funnel, Key marketing metrics (CAC and CLV) and Churn, +1 practice case

Feel free to PM me for disccount codes for the guide, and I hope it helps you rock your interviews! 

Hi there!

Yes. 

For anyone else who is preparing for case interviews, I’ve put together this material that covers virtually all the formulas you need:

• Cheatsheet: The Must-Know Consulting Terms for Interviews

Best,

Cristian

Hi,

Here is a list of the necessary math and formulas:

• Interest rates calculations
• Compound margin
• NPV using the Rule of 72, Perperuity
• CAGR using the Rule of 72
• Little's Law
• Currencies exchange calculations
• Speed, time, distance calculations
• Equations, systems of equations
• Ratio & Proportions
• Solving the problems by calculating the area of the triangle
• Profit / breakeven formula
• Correlations, outliers (being able to spot on the graphs, tables)

Best

You may use math structures while problem-solving during the case. For example, if you have to understand why our factory has 4 FTEs doing the cleaning while Competitors use just 2 FTEs, you can structure it like:

Frequency of cleaning per day * working days * FTEs per 1 cleaning

After deriving the numbers you may find that a single cleaning procedure is longer and you may want to check if the problem is in: People / process / technology

Best

Hi Felicia,

thanks for asking your question on our Consulting Q&A!

Have you seen this question that was asked recently: Formulas for consulting interviews?

I think it answers your question :)

Hope this helps!

Astrid

PrepLounge Community Management

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