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# Calculation of Change in Profitability

Hot Wheels profitability analysis
New answer on May 19, 2020
2.5 k Views

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 :)

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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!

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