Calculation of Change in Profitability

Question

I have just been through this case in a meeting as an interviewer, but both me and my interviewee came up with different numbers for the changes in profitability. Is this a mistake of the numbers in the case, the formula (changes in profitability = changes in sales * profit margin) or our understanding of profit margin and calculation of profitability?

E.g, for seatbelts, if the profit margin is 50 %, and the change in sales is - $90 Mio, shouldn't the change in profitability be $-90 Mio*0,5 = -$45 Mio of this, and not -$23 Mio?

Thank you for your help :)

Answer 1

Hi Benedikt,

You are correct! My apologies, the case will be updated shortly :)

In summary:

1) Seatbelt change in profitability is indeed -$45M

2) Total projected change in profitability is -$43M

Apologies for the confusion!

Answer 2

AI and ChatGPT are definitely game-changers for consulting prep! They’re great for structuring case frameworks, gener... (read entire answer)

AI and ChatGPT are definitely game-changers for consulting prep! They’re great for structuring case frameworks, generating potential interview questions, and even simulating cas... (read entire answer)