AFM 433 MIDTERM CHEAT SHEET
#1 Situation Size Up
Internal Analysis (SP1, SP2) business
Situation (complex system vs. Volume
Operations model)
- Role
- Requirement
- Stakeholders
- SQ Strategy Statement
To: (objective)
By offering: (value prop)
To: (target customers)
Through: (advantages)
- Trigger-challenge vs opportunity
(when the strategy doesn’t fit the
environment)
model analysis – customer value prop,
profit formula (revenue model, cost
structure, margin model) resource
velocity), key processes, key resources
 Resource gap (customer value
prop, required resources, available
resources, actions to close gap, is it
feasible?)
 Profitability gap (financial size up:
revenue, profitability, financial
position – debt and cash)
o projected income
statements for each SP
(revenue, COGS, Gross
profit, SG&A, EBIT/EBITDA,
net income)
o revenue – project growth
o expenses – split variable
and fixed costs accordingly
 SO WHAT?
Value Prop: innovation, service, feature
intended to make a company attractive
to customers
#2 Strategic Possibilities


SQ
SP1, SP2, SP3
#3 Analysis
External Analysis (SQ)
Porter’s 5 Forces (industry analysis) –
used to understand whether the
industry is profitable or not (key
barriers to entry/mitigate bargaining
power)
- How would you scope?
- Buyer power – high: few buyers,
standardize products
- Suppliers power – no substitutes,
suppliers offer diff products/services
- Threat of new entry
- Threat of Substitutes
- Competitive rivalry – industry growth
is slow, exit barriers high, high fixed
costs, identical offerings
- SO WHAT?
PEST (customer value & customer
analysis) - TRENDS
- Political (gov issues, policies, tax, env
reg)
- Economic (stability of economy –
growing, stagnant, declining –
disposable income, interest rates
- Social (age groups, population, social
media, health, education)
- Technological (new technology)
- SO WHAT?
Break Even Analysis = total fixed
costs/(unit selling price-total variable
costs)
Debt/Equity Ratio – too high=trouble
getting financing, debt allows company
to leverage small amount of money into
much larger sum and repay over time –
fund expansions quickly
 =Total liab/total SH equity
Revenue Growth CAGR= (ending
value/begin value)(1/# of years) – 1
Payback Period= cost of inv/annual net
cash flows
DCF/EV= CF/(1+r)1 + CF/(1+r)2..
Terminal Value= CF*(1+g)/(r-g)
FV = EV-debt
Profitability Ratios
ROA = NOPAT/net assets
= NOPAT/ revenue (operating
margin) x revenue/net assets (resource
velocity)
Operating Profit = operating revenue –
COGS – OP exp – depreciation
ROE = ROA * assets/SH equity
= net profit margin*asset
turnover*equity multiplier (financial
leverage)
ROI = (gain from inv – cost of inv)/cost
of inv * 100
Profit Margin= NI/total revenue
(operating efficiency)
EBITDA = Net Profit + Interest +Taxes +
Depreciation + Amortization
Asset Turnover= total rev/total assets
(asset use efficiency)
Liquidity & Solvency Ratios
Current Ratio= cur asset/cur liab
Quick Ratio= (cur assets-inv)/cur liab –
liquid assets cover ST liab
Inventory Turnover= COGS/inv
Days Inv O/S= 365/inv turnover
Times Interest Earned= EBIT/int exp –
ability to meet debt oblig
SWOT Analysis (SO WHAT? - SQ)
 Strength
 Weakness
 Opportunity
 Threat
#4 Recommendation


D-M Matrix
o Choose by what you
prioritize and explain
Recommendation
o Reason #1
o Reason #2
o Reason #3
#5 Implementation



Considerations
Implications
Risks and how to mitigate
AFM 433 MIDTERM CHEAT SHEET
D-M Matrix (example)
Criteria
SQ
SP1 - Expand
SP2 - South
SP3 Downtown
Revenue
$1943
$3001
$3888
$3888
Profit
$103
$224
$268
$208
ROI
N/A
161%
110%
70%
Compensation
Lowest
Moderate
HIgher
HIghest
HR risk
N/A
Low
Higher
Higher
Risk of failure
N/A
Low
Higher
Higher
Quickest
Longer
Longer
Time frame
RESOURCE ANALYSIS (example)
SQ
SP1
SP2/Sp3
Human
resource
Two Full time sales
Five part time sales
Two full time tailors all
knowledgeable
Will need incremental
sales and tailors
(50% increase)
Will need training but
can leverage existing
staff and hands on
owner management
Need to find store
locations
$150k in leasehold
improvements
Physical
Existing 2850 sq ft store
front and side windows
Dressing rooms
Upscale sitting area website
All strengths
1550 sq ft space
available
Needs leasehold
improvements
Need to find store location
150 in leasehold
improvements
Financial
Limited information
2mm in revenue
300k in net income
75k in leasehold
improvements
More rent at $39 sq ft
100k in leasehold
improvements
$40 to 60 per sq ft
depending on location
Can leverage word of
mouth advertising
Will need increased
advertising
Intangibles High quality, high service
image
Word of mouth advertising