Bcg finance formulas

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

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(edited)

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

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