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Marco-Alexander

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What additional check should we perform to verify if our estimated earnings are realistic?

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Hi Arez,

the way how you validate your numbers depends mainly on the way how you have calculated them. In the validation, you calculate the numbers again in a different way.

In addition, you should always evaluate your numbers and compare them to other numbers.
For example: Is it realistic that a company has a revenue of 5 billion dollars if it has only 30 employees?

Best regards
Marco Alexander

Hi Arez,

the way how you validate your numbers depends mainly on the way how you have calculated them. In the validation, you calculate the numbers again in a different way.

In addition, you should always evaluate your numbers and compare them to other numbers.
For example: Is it realistic that a company has a revenue of 5 billion dollars if it has only 30 employees?

Best regards
Marco Alexander

Calculate historical ratios (earnings to sales, gross margin, operating margin, earnings per unit sold ...) and compare them against the forecasted ratios. Ceteris paribus, the forecasted ratios shouldn't devate much from the historical ones.

Calculate historical ratios (earnings to sales, gross margin, operating margin, earnings per unit sold ...) and compare them against the forecasted ratios. Ceteris paribus, the forecasted ratios shouldn't devate much from the historical ones.

If it is a Market Size case, and the context about "guesstimates" (i think it is). First of all, you need to reconcile your answer (est. earnings) to baseline from which it was derived. Example: what % does estimated earnings take from total earnings? Secondly, - as i understand, you're always expected to provide recommendations how to make your estimation more relevant. I don't understand how it is possible to start calculate historical ratios on the case interview. — Artur R. on Sep 06, 2019 (edited)

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