WAT-PI Kit
2021
Collected by Growjunction
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Credits : IIM Trichy Club and Committees
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Disclaimer
This document is for reference purposes only and does not represent any
endorsement by Growjunction. This kit is not exhaustive, and we urge you to use it
only to better your preparation to ensure that you give your best shot on D-day.
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Let’s Get Started
How to prepare for WAT?
Practice makes a man perfect. Hence, the best way to crack WAT is to practice 1 or 2
essays daily. This helps in reducing pressure while appearing for WAT.
Writing should follow a definite structure as it implies clarity of thoughts. This may help
in fetching more points.
The general framework for an essay is as follows: introduction, body, and conclusion.
Avoid grammatical and spelling mistakes, fanatic remarks over politics and religion,
jargon, etc.
Keep sentences short, precise, and lucid.
They say the first impression is the last impression, hence, try to start with an interesting
first line or a quote.
Supplement your ideas and opinions with logic. Data facts and figures can be used to
support your idea.
Most important, handwriting should be neat and clear.
Writing should be legible.
How to prepare for a personal interview?
The first question will be mostly to Introduce Yourself. Prepare an introduction for
at least 4-5 minutes.
Ensure you practice your introduction well so that you sound confident. Emphasize the
points that you would like to be questioned upon when you are introducing yourself.
Prepare thoroughly on your RESUME. Questions related to academics, especially those
subjects which you claim to interest you; people with work experience can be
questioned on your role at your organization and any projects you may have worked on,
questions related to the concerned industry, etc.
Confident body language and good communication skills are expected.
Maintain eye contact and address all the panel members
Do a SWOT analysis of yourself and be prepared to talk about the situations where you
found your strengths useful and when you tried to overcome your weaknesses.
Don’t be anxious and try to keep the conversation going.
Interviewers like to know more about you.
Listen to the questions carefully, ask for clarifications if required. Don’t rush into
your answer. Take a few seconds to think.
Basic etiquette like seeking permission before entering the room, greeting the
panelists being polite goes a long way in creating a long-lasting impression.
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Frequently asked PI questions
A. Resume based questions
People with work-ex: Job profile details, company info, competitors, major
business areas, about recent developments in the industry, etc.
If there is a gap in the career or academics, then questions related to that may be
asked.
Questions may be asked on academic record, favourite subject in graduation, projects,
etc.
Questions may be asked on your city, region, state you belong to. Be prepared with the
names of politicians, prominent business people, and the history of the region you hail
from.
B. Questions about self
About yourself, Strengths, Weaknesses, etc. These can be answered by doing a SWOT
analysis of yourself.
Why should we select/reject you?
What are your long-term and short-term goals?
What are your hobbies? Make sure that you mention only those hobbies that you were
engaged with and can elaborate on.
What is your biggest achievement/failure?
What is the meaning of your name? How does it relate to your personality?
C. MBA based questions
Why MBA?
Why MBA after engineering?
Why MBA without/with Work-ex.
Which other IIM and B-school calls do you have?
Which specialisation would you choose and why?
If you choose marketing as your intended specialisation, the following questions
might
be asked to Sell this Pen/Tie/Glass to me, what are the 4 P’s of Marketing, etc.
Please prepare for basic questions in the area you would choose as your specialisation.
What are your expectations from a Business School?
What would you do if you don’t secure admission this year?
What is the difference between MBA & PGDM?
What according to you are the qualities of a good manager?
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D. General Questions
Questions may be asked on analysis and guesstimates. For instance, how
many people live in your surroundings, or how many bikes are there in India.
These questions don’t have any fixed answers. They are asked to test your
thought process. A good approach to tackling such questions will be thinking
aloud so that the panel gets a clear idea about your approach.
Abstract questions like Why blue is blue and not red, may also be asked.
Some questions on basic physics, mathematics, problem-solving skills. Here
importance will be given to the process you follow, rather than the outcome.
Staying up to date on Current Affairs
An easy way to stay updated on current happenings is to make sure you read the news
headlines as they happen. We suggest installing news apps from all over the world and
enabling notifications, so you never miss a headline.
These are the apps we use and recommend:
Global: NYTimes
US: CNN, Bloomberg
UK: BBC
Indian Business and Economics: LiveMint, Economic Times
Indian News: The Hindu, Scroll.in, NewsLaundry
Middle East: Al Jazeera, Khaleej Times
Should you choose your own media house, avoid political party mouthpieces and those
media houses with extreme views. An MBA graduate needs a balanced view to form a
balanced opinion.
GD/WAT topics
1. RCEP Agreement: Is it a step in the right direction?
2. India’s approach towards fulfilling job needs of young India
3. Data protection bill is a step forward to protect an individual’s data from private
companies but two steps backward in placing safeguards from government surveillance
4. Corporate Tax cut: Is it a step in the right direction?
5. Modern technologies are changing the way we live, work, and play, sooner than we
think.
6. Urgent reforms in the Indian Banking system are necessary and imperative to boost the
economy.
7. Gender sensitization and wider societal changes are needed to end sex crimes prevalent
in our country.
8. Challenges faced by Indian Automotive Industry
9. If we need to tackle climate change, sensitivity towards it needs to be incorporated as a
way of life right from our foundation years till the very end.
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10. Big Data and Information Privacy – A future challenge
11. Is India ready for 5G?
12. The success of start-ups in India- Challenges and Recommendations
13. Opportunities and challenges of Brexit to global trade
14. US-Iran tensions: is the drone strike on the now-deceased Iranian military commander
justified for US security, or is it a political move to secure Trump’s second term in office?
15. We are amid a resurgence of right-wing leaders around the world. Will these leaders
bring an era of authoritarianism or would they strengthen democracy?
16. Global suppression of Freedom of the press - a needed step for progress, or a lethal
threat to democracy?
17. Comment on the Finance Bill 2016-17.
18. “The biggest fear prevalent in the modern economy is that of an imminent recession.”
Comment.
19. Tata vs Mistry, the crisis at WeWork, and more - comment on the current
corporate governance scenarios.
20. Is the mega venture capital world we live in today sustainable?
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ANALYTICS
What is Analytics?
Analytics is the Systematic process of extracting and communicating insights from patterns
available in data through statistical methods and data modelling techniques. It is the process
of converting raw data into business insights to make well-informed decisions.
Data analytics
▪
▪
▪
Descriptive Analytics – a process of analyzing historic data to identify patterns and
extract insights on past events
Diagnostic Analytics – a process of mining data to identify reasons behind the
occurrence of events/results
Predictive Analytics – Forecasting future events/results through Machine learning
techniques
Prescriptive Analytics – Suggests action that could influence the predicted outcomes.
▪
Machine Learning Models
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1. Linear Regression
A technique used to predict the outcome of a dependent variable (Y) by establishing a
linear relationship between the dependent variable and independent variables (X).
An example: Predicting house prices based on historic house sales data.
2. Logistic Regression
A supervised learning technique used to predict categorical variables based on historical
data.
An example: Is the Money Transaction fraudulent? Yes/No
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3. Clustering
Unsupervised learning techniques to group data points into different categories based
on the parameters of the data points.
An example: Categorizing customers based on shopping behaviour.
4. Neural Networks
Machine learning technique inspired by neurons of the human brain to perform complex
prediction/classification through multiple layers of computation.
Statistics
1. Measures of Central Tendency
a. Mean:
The mean is the sum of the values divided by the number of values:
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b. Median: The median is the middle value in an ordered array of data that has been
ranked from smallest to largest. Half the values are smaller than or equal to the median,
and half the values are larger than or equal to the median. The median is not affected
by extreme values.
Median = (n+1)/2 ranked value
c. Mode: The mode is the value that has the highest frequency. Like median, extreme
values do not affect the mode.
2. Variance and Standard Deviation
Variance refers to a statistical measurement of the spread between
numbers in a data set. Mathematically, it is the average of the squared differences from the
mean.
Standard Deviation (σ): Standard Deviation is the square root of the average of the
squared differences from the mean.
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3. Central Limit Theorem:
It states that, as the sample size gets large enough (at least 30), the sampling
distribution of the mean is approximately normally distributed regardless of the shape of
the distribution of the individual values in the population.
Probability Distributions
1. Normal Distribution:
The normal distribution is a symmetrical bell-shaped distribution, which suggests the
profile of a bell. Although the values in a normal distribution can range from negative
infinity to positive infinity, most values of the continuous variable will cluster around the
mean, while extremely large or extremely small values will occur towards the tail.
2. Uniform Distribution:
The uniform distribution, also known as the rectangular distribution, contains values that
are equally distributed in the range between the smallest value and the largest value
where every value is equally likely.
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3. Bernoulli Distribution:
The Bernoulli distribution is a discrete distribution having two possible outcomes labelled
by n = 0 and n = 1 in which n = 1 ("success") occurs with probability P and n = 0 ("failure")
occurs with probability q = 1 - p, where 0 < p < 1
4. Binomial Distribution:
The binomial distribution gives the discrete probability distribution of obtaining exactly n
successes out of N trials (where the result of each trial is true with probability p and false
with probability q = 1 - p). The binomial distribution is given by
5. Poisson Distribution:
A Poisson distribution helps to predict the probability of certain events when the average
number of times an event has occurred in given time interval is known.
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Emerging Technologies:
1. Blockchain
A Blockchain is a group of blocks linked together with the use of cryptography among a
network of people/computers. Each block contains some data, and it can be accessed by
anyone in the connected network. The data in these blocks cannot be modified though. Every
change in the network will be considered as a new entry, thus preserving
the original data that can be accessed anytime. If one person wants to change or add some
data in a network, then that will have to be approved by a majority of the individuals
in the network.
2. Big data
In simpler words, Big Data is huge amounts of unstructured data (does not have a predefined data model). The Five V’s of Big Data are:
Velocity - refers to the high speed of accumulation of data
Volume – It is a huge amount of data. The name ‘Big Data’ itself is related to an
enormous size.
Value – refers to the worth of the data extracted
Variety – The different types of data that is collected from various sources
Veracity – refers to the inconsistencies in the data; How accurate is the data that is
collected?
3. Industry 4.0
It’s a name given to the transition of using traditional manufacturing methods along with
new-age technologies. It includes technologies like cyber-physical systems, IoT, Cloud
computing, and cognitive computing. With the help of AI and interconnected systems, the
industry is now moving towards more automation and collecting real-time data. Industry 4.0
offers a more comprehensive, interlinked, and holistic approach to manufacturing.
4. Artificial Intelligence
AI is often confused with other terms like machine learning or deep learning. Artificial
Intelligence, in simple terms, is a field that aims to turn a machine or a ‘dumb’ thing, into an
entity that can think, understand, and react like a human. There are multiple ways a system
can be programmed to achieve this and all those require data to work with. Only through the
input of a large quantity of data, will a machine be able to learn and take decisions.
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5. Quantum Computing
Quantum computing controls the behaviour of electron and photon particles, in a way
different than regular computing. In normal computing, the computer is used to complete
a task and there every bit is stored as either 0 or 1 and the electron can be at only one
place, i.e only one calculation at a time. Hence when there is large data it reduced its
computational power.
eg: B in computing is stored in binary as 01000010.
Unlike normal computers which function on bits - 0 or 1, Quantum computing uses
superposition which allows electrons to be at more than one place at the same time and
0 and 1 can superimpose each other. It forms quantum bits – Qubits. So, the data stays
unrecognized until it’s called and then it becomes either 0 or 1.
Quantum computing increases speed reduces the number of operations and helps in
reducing power consumption.
Tools Used
Visualization
Power BI
Tableau
Qlik
Metabase
Modelling
Python
RStudio
SAS
Bigdata
Hive
PySpark
Apache
Excel
Microsoft SQL Server
Google Data Studio
Analytics as a career:
Data Science
IT Consulting
Business Intelligence
Business Analytics
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Courses offered
Quantitative Methods
IT Consulting
Managing digital transformation
Business Analytics for Decision Making ECommerce & E-Business
Artificial Intelligence for Managers
Software Project Management
Big Data Analytics
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ECONOMICS
Economics: Economics is the social science which deals with the prioritization of options
available by individuals, society, and government for using the scarce resources to meet the
various needs of life.
Microeconomics: Microeconomics is the branch of economics that deals with decisions made
by individuals to use the resources, interactions between the individuals for utilization and
distribution of the scarce resources.
Macroeconomics: Macroeconomics is another branch of economics that deals with the
aggregate behaviour of the economy (regional, national or global) in terms of performance
parameters such as inflation, GDP, national income, price levels, etc.
Capitalist Economy: It is the economy where the decisions about what to produce, how much
to produce, and the price at which to sell is solely taken by the market or the private enterprises
in the system and the state has no economic role. This concept was originated in the famous
work of Adan Smith-Wealth of Nations (1776).
State Economy: It is the economy where the decision production, distribution, supply, and
price are solely taken by the state.
Mixed Economy: It is the economy where some elements of the economy are controlled by
the state and the rest of the elements are regulated by the market. In another way, it can be
said that it is the combination of a capitalist economy and a state economy.
National Income: Income of the Nation can be calculated in four ways: GDP, NDP, GNP, NNP,
which is also a subject in ‘National Income Accounting’.
GDP: Gross Domestic Product is the value of all the final goods and services produced within
the boundary of the nation during one year. It is the summation of national private consumption,
gross investment, government spending, and trade balance.
NDP: Net Domestic Product (NDP) is the GDP minus the depreciation of the goods and
services produced.
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GNP: Gross National Product is the summation of the GDP of a nation and the income of the
nation from outside of the nation. GNP indicates both the quantitative and qualitative aspects
of the economy.
NNP: Net National Product (NNP) is the GNP minus the depreciation of the economy.
Inflation: Inflation is the quantitative measure of the increase in the general price level of goods
and services which results in the decrease of the purchasing power per unit of a currency.
Stagflation: Stagflation is the situation of an economy when inflation and unemployment both
are at higher levels that is opposite to the conventional situation. The conventional belief is that
a trade-off exists between inflation and the unemployment rate according to Phillips Curve.
GDP Deflator: It is the measure of price behaviour. It is the ratio of GDP at the current price
and GDP at a constant price.
Fiscal Policy: The policy in which the nation’s economy is regulated and monitored by the
government’s adjustment in spending and taxation.
Monetary Policy: The policy in which price stability and money supply and inflation rate
regulation are taken by the central bank of a country to achieve the macroeconomic objectives.
Cash Reserve Ratio: Cash Reserve Ratio is the mandatory percentage of share a bank has
to keep with the Reserve Bank of India in liquid cash to combat the inflation and keep the
liquidity in check/
SLR: Statutory Liquidity Ratio is the share of a bank’s deposits kept with RBI in the form of
Liquid assets to ensure the bank’s solvency and money flow in the economy.
Bank Rate: Based on the monetary policies, commercial banks can borrow loans from banks
from the central bank. The interest rate charged by the RBI on these types of loans and
advances to the banks is known as bank rate.
Repo Rate: Repo rate is the interest rate at which RBI lends money to the banks for the short
term. With the help of the Repo Rate, RBI can regulate the inflation and liquidity of the economy
of the country.
Reverse Repo Rate: Reverse Repo Rate is the rate at which commercial banks give loans to
the RBI. Reverse Repo Rate helps to regulate the money supply in the economy.
Direct Taxes: The tax amount levied directly on an individual or organization’s income or
property by the imposing body. It is based on the principle of ability-to-pay, which means the
entity with more resources has to pay more amount of tax. Examples of Direct Taxes are
income tax, wealth tax, property tax, corporate tax, etc.
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Indirect tax: It is the tax collected by an intermediary and paid to the government by passing
the tax burden on the consumer buying that good or service. It is the tax imposed on the goods
and services instead of on a person or organization’s income, earnings, or property. Examples
of Indirect tax: Value Added Tax, Customs Duty, Service Tax.
Good and Service Tax: It is a destination-based indirect tax that is imposed on the value
addition at each stage till the final sale to the consumer. It has replaced many indirect taxes in
India. Goods and Services are divided into five tax slabs for the collection of the tax: 0%, 5%,
12%, 18%, and 28%.
Economies of scale: Economies of scale are achieved when companies can reduce the
manufacturing cost of their products by increasing the production facility. There are fixed costs
attached to each project, which don’t increase in the same proportion as the production
increment. This means, that when production increases, the fixed costs are distributed over a
larger number of units, resulting in lower costs per unit.
Economies of scope: Economies of scope result when a wider variety of items are produced
in tandem by an organization, which means the benefits of producing one item can be
leveraged by another. For example, if an organization produces only one FMCG product, it
needs to spend on all aspects of marketing and packaging. However, manufacturing multiple
FMCG products results in using the same expertise in packaging and manufacturing (and the
wages provided to people working in those departments) towards other FMCG products as
well.
Some general awareness- economics questions
Q1. What are the three farm laws that have been brought forth by the central government?
Q2. Explain the reasoning behind large FDI inflows in the country even though there has been
massive unemployment?
Q3. Compare the vaccination drive ongoing in the US with India?
Q4. What do you know about the budget 2021?
Q5. What is your opinion of the AtmaNirbhar Bharat?
Q6. The rise of Jio during the lockdown and particularly in 2020 was exceptional. Could you
briefly explain about the companies that invested in Reliance Jio?
Q7. India US times were at an all-time high during the presidency of Donald Trump. How the
impact of Biden Harris Presidency will affect the relationship with India
Q8. The recent attack on the US Capitol is a blot on US democracy. Do you think there is a
rise of extremism and fundamentalism across the globe?
Q9. Elon Musk has been declared as the richest man on the planet. What he does and what
led to the rise from PayPal to SpaceX?
Q10. What is National Education Policy? Why was it so important?
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HUMAN RESOURCES
Human Resource Management (HRM) is the term used to describe formal systems devised
for the management of people within an organization. The responsibilities of a human resource
manager fall into three major areas: staffing, employee compensation and benefits, and
defining/designing work. Essentially, the purpose of HRM is to maximize the productivity of an
organization by optimizing the effectiveness of its employees. This mandate is unlikely to
change in any fundamental way, despite the ever-increasing pace of change in the business
world.
HR ConceptsRole of HR Managers-
Management by Objective: Management by Objectives (MBO) is a personnel management
technique where managers and employees work together to set the record and monitor goals
for a specific period of time. Organizational goals and planning flow top-down through the
organization and are translated into personal goals for organizational members. It aims to
improve the performance of an organization by clearly defining objectives that are agreed to
by both management and employees.
360-degree Performance Appraisal: A 360-degree appraisal is a type of employee
performance review in which subordinates, co-workers, and managers all anonymously rate
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the employee. This information is then incorporated into that person's performance review.
The feedback is often used as a benchmark within the employee's development plan.
Balanced Scorecard - The balanced scorecard is a strategic planning and management
system that is used extensively in business and industry, government, and non-profit
organizations worldwide to align business activities to the vision and strategy of the
organization, improve internal and external communications, and monitor organization
performance against strategic goals.
Maslow’s Need Hierarchy Theory - Maslow's hierarchy of needs is a motivational theory
in psychology comprising a five-tier model of human needs, often depicted as hierarchical
levels within a pyramid. Maslow stated that people are motivated to achieve certain needs
and that some needs take precedence over others. Our most basic need is for physical
survival, and this will be the first thing that motivates our behaviour. Once that level is
fulfilled the next level up is what motivates us, and so on. This five-stage model can be
divided into deficiency needs and growth needs.
The first four levels are often referred to as deficiency needs (D-needs), and the top-level is
known as growth or being needs (B-needs).
Big Five Model of Personality
Personality is an easy concept to grasp for most of us. It’s what makes you “you”. It
encompasses all the traits, characteristics, and quirks that set you apart from everyone else.
Human resources professionals often use the Big Five personality dimensions to help place
employees. The Big Five traits are
▪
Openness - Openness includes traits like being insightful and imaginative and having
a wide variety of interests.
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▪Conscientiousness - People that have a high degree of conscientiousness are
reliable and prompt. Traits include being organized, methodic, and thorough.
▪
Extroversion - Extraverts get their energy from interacting with others, while introverts
get their energy from within themselves. Extraversion includes the traits of energetic,
talkative, and assertive.
▪
Agreeableness - These individuals are friendly, cooperative, and compassionate.
People with low agreeableness may be more distant
▪Neuroticism - Neuroticism is also sometimes called Emotional Stability. This
dimension relates to one’s emotional stability and degree of negative emotions.
▪
Attitude - “My personality is who I am and my attitude is who you are.” Our behavior
towards an individual, group or people surrounding us changes but our personality is
rigid, it does not change.
▪
Emotional intelligence - The intelligence that we acquire on interacting with
individuals and adapt accordingly in a conversation with the individual is termed as
emotional intelligence. For ex, within two conversations with Ravi, I came to know
about Ravi’s reluctance to talk about this family, hence I do not talk about this family
anymore in our conversations. This adaptation is due to emotional intelligence.
▪
Decision-making process - In psychology, decision-making is regarded as the
cognitive process resulting in the selection of a belief or a course of action among
several alternative possibilities.
The six steps involved in decision-making are as follows:
1. Define the problem
2. Identify the decision criteria
3. Allocate weight to the criteria
4. Develop the alternative
5. Evaluate the alternative
6. Implement the best alternative
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We measure the output to check the Effectiveness and efficiency of the decision made.
Span of control - The number of people or say employees who reports to you is the span of
control.
Organizational design - In simple terms, organization design means how various parts of the
organization and its distinct elements are brought together to make it functional. Organizational
design principles consider how these elements come together, matches, and the process and
ways through which they can be reflected and improved.
Competitive advantage - It refers to what sets the organization apart from others and
provides it with a distinctive edge for meeting customer or client needs in the marketplace. It
arises primarily due to the core competence of the organization. Core competency is an
organization's defining strength, providing the foundation from which the business will grow,
seize upon new opportunities and deliver value to customers. A company's core competency
is not easily replicated by other organizations, whether existing competitors or new entries
into its market. For example, Honda's core competence is attributed to manufacturing
capability and a culture of innovation which gives birth to lightweight, high-revving, reliable
engines which Honda uses in its multiple products like cars, gensets, lawnmowers etc.
Remember products are not a core competency.
Strategy - Strategy can be defined as "A general direction set for the company and its various
components to achieve a desired state in the future." It means that all the organization's
energy and resources are directed towards a focused, unifying, and compelling output or
future state of the organization.
Codification of Labour Laws in India-
Why was there a need to reform and codify India’s Labor Laws?
The existing laws have neither benefited industries nor workers due to various reasons such
as:
Complexity and plethora of laws
Poor enforcement of laws
Promoted more capital-intensive industries
Contractualization of labor
High administrative burden
Inadequate coverage hiking social issues
There are 4 Codes
1. Occupational Safety, Health, and Working Conditions Code, 2020
2. Industrial Relations Code, 2020
3. Code on Social Security, 2020
4. Code on Wages, 2019
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FINANCE
The primary focus of a business is to increase its value – and it mostly zeroes down on how
much money it makes and manages, which is when finance managers come into the picture.
Finance professionals (in Corporate Finance) are accountable to manage the money of the
organization i.e., knowing from where to source it, deciding how to spend it to get the maximum
returns at the lowest possible risk. They seek to find ways to ensure the flow of capital,
increasing profitability and decreasing expenses. They explore the best ways to help
companies expand whether it is through acquisition or investing internally.
Yes, a career in finance does get a lot of glory and salaries can go sky high, but you’ll have to
work hard for it.
Basic Concepts in Finance
Financial Statements
Financial statements are a collection of reports about an organization's financial health, and
performance. They are useful for the following reasons:
To determine the ability of a business to generate cash and the sources and uses of that
cash.
To determine whether a business can payback its debts.
To track financial results on a trend line to spot any looming profitability issues.
To derive financial ratios from the statements that can indicate the condition of the
business.
To investigate the details of certain business transactions, as outlined in the disclosures
that accompany the statements.
There are 3 core financial statements
1. Balance Sheet
2. Income Statement/ Profit and Loss Statement
3. Cash Flow statement Basic concepts in Finance
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Balance Sheet
Balance Sheet summarises a company's assets, liabilities, and shareholder's equity at a
particular point in time. It presents a snapshot of the financial position of the company. It is
based on the following accounting model:
Assets = Liabilities + Shareholders’ Equity
Assets are of two types:
▪
Fixed assets - Assets that are purchased for a long term and cannot be easily converted
into cash. It includes building, land, machinery etc.
▪
Current assets - Assets that can be quickly converted into cash. It includes money
market instruments, debtors etc.
▪
Liabilities are obligations of the company, payable to another entity. Liabilities are
incurred to fund the ongoing activities of a business. If the obligation is due within the
next 12 months, it is classified as a current liability.
▪
Income Statement Shareholder’s equity represents the number of business holdings that weren't
purchased using debt (loans).
Income Statement reports how much revenue the company generated, the expenses it incurred
and the resulting profits or losses during a period of time (usually a financial year). The basic
equation underlying the income statement is:
Revenue – Expenses = Income
Revenue which is also known as "Top Line", is the amount of money the company receives
during a particular period.
Expenses are summarized and recorded in the income statement as deductions from the
income before assessing income tax.
Income
is the increase in the net inflow of cash or other assets during an accounting period.
Cash Flow Statement
Cash flow statements tabulate how much cash is coming in and going out of the firm. There
are three major elements in the cash flow statement:
Cash flow from operating activities: It encompasses cash generated from a company’s day
to day operations of buying and selling goods and services.
Cash flow from investing activities – It pertains to the purchasing and selling of investments
which include property, plant, and equipment.
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Cash flow from financing activities – It covers obtaining or repaying capital. This includes
the sale of stock, stock repurchase, and issuance of dividends
Capital Market
To understand what a stock market is, we will need to understand the types of companies.
Please go through the below video at once for an understanding
Youtube - How the stock market works
What is a share?
In very simple terms, A share is an ownership of a company. Let’s suppose the company Oil
Drum Mfg. Co is divided into 1000 shares. So, 1 share = 0.1% ownership of a company.
In the case of a Public limited company, the shares are registered and traded over a stock
exchange. In the case of Private limited the shares are not freely traded. They can be bought
or sold among existing holders or by the company Thus, the companies we see being traded
(bought/sold) at various exchanges like NSE and BSE are public companies.
Shares of companies can be traded in two ways:
Primary Offer or Primary Market (IPO/FPO)
IPO or Initial Public Offer is a primary offer in which a company offers to sell its shares to the
general public for the first time. FPO or Further Public Offer is a primary offer in which a
company offers for sale its shares to the general public after the first offer is made. In such
situations, the shares are already being traded. New shares are issued to the market.
Secondary Market
Different offerings to the public: In a primary offer, the company sells the shares of a company
to the general public through IPO or FPO. Once the IPO is done and the stock is listed, they
are traded in the secondary market.
The main difference between the two is that in the primary market, an investor gets securities
directly from the company through IPOs, while in the secondary market, one purchases
securities from other investors willing to sell the same. Equity shares, bonds, preference
shares, treasury bills, debentures, etc. are some of the key products available in a secondary
market. SEBI is the regulator of the same.
SENSEX
Sensex, otherwise known as the S&P BSE Sensex index, is the benchmark index of the
Bombay Stock Exchange (BSE) in India. Sensex comprises 30 of the largest and most actively
traded stocks on the BSE, providing an accurate gauge of India's economy. The index's
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composition is reviewed in June and December each year. Initially compiled in 1986, the
Sensex is the oldest stock index in India. Analysts and investors use the Sensex to observe
the overall growth, development of particular industries, and booms and busts of the Indian
economy.
NIFTY
The NIFTY 50 index is the National Stock Exchange of India's benchmark broad-based stock
market index for the Indian equity market. The full form of NIFTY is National Stock Exchange
Fifty. It represents the weighted average of 50 Indian company stocks in 12 sectors and is one
of the two main stock indices used in India. Nifty is owned and managed by India Index Services
and Products (IISL), which is a wholly-owned subsidiary of the NSE Strategic Investment
Corporation Limited.
SEBI
Securities and Exchange Board of India (SEBI) is a statutory regulatory body entrusted with
the responsibility to regulate the Indian capital markets. It monitors and regulates the securities
market and protects the interests of the investors by enforcing certain rules and regulations.
The objective of SEBI is to ensure that the Indian capital market works systematically and
provide investors with a transparent environment for their investment.
Important Rates
Repo Rate (4% as of 6 January 2021):
Repo rate is the rate at which the central bank of a country (Reserve Bank of India in the case
of India) lends money to commercial banks in the event of any shortfall of funds. Repo rates
can be used by monetary authorities to control inflation.
Reverse Repo Rate (3.35% as of 6 January 2021):
Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in
the case of India) borrows money from commercial banks within the country. It is a monetary
policy instrument that can be used to control the money supply in the country.
Cash Reserve Ratio (3% as on 6 January 2021):
Cash Reserve Ratio (CRR) is the share of a commercial bank’s total deposit that is mandated
by the central bank of a country (Reserve Bank of India in case of India) to be maintained with
the latter in the form of liquid cash.
Statutory Liquidity Ratio (18.5% as of 6 January 2021):
The ratio of liquid assets to net demand and time liabilities (NDTL) that is mandated by the
central bank of a country (Reserve Bank of India in case of India) to be maintained with the
latter is called statutory liquidity ratio (SLR).
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Call Rate
Call money rate is the rate at which short term funds are borrowed and lent in the money
market. The duration of the call money loan is 1 day to 14 days. Banks resort to these types of
loans to fill the asset-liability mismatch, comply with the statutory CRR and SLR requirements,
and to meet the sudden demand of funds.
Non-Performing Assets
A non-performing asset (NPA) is a loan or advance for which the principal or interest payment
remained overdue for a period of 90 days. Banks are required to classify NPAs further into
Substandard, Doubtful, and Loss assets.
Substandard assets
Substandard assets are the assets that have remained NPA for a period less than or equal to
12 months.
Doubtful assets
An asset would be classified as a doubtful asset if it has remained in the substandard category
for a period of 12 months.
Loss assets
As per RBI, “Loss asset is considered uncollectible and of such little value that its continuance
as a bankable asset is not warranted, although there may be some salvage or recovery value.”
CIBIL Score
The Credit Information Bureau (India) Ltd, popularly known as CIBIL is a Reserve Bank of India
(RBI) authorized credit agency. It offers CIBIL scores and CIBIL reports for individuals. A CIBIL
score is generated by the bureau after considering an individual's detailed credit information.
The agency also offers credit report services to the banks and other NBFC (Non-banking
financial companies). A CIBIL score is a three-digit number between 300-900, 300 being the
lowest, that represents an individual's
creditworthiness. A higher CIBIL score suggests good credit history and responsible
repayment behaviour. CIBIL scores are calculated on the basis of at least 6 months of historical
financial data of an individual.
Security Analysis and Portfolio Management
WACC
In long term capital structure,
Wd*Kd*(1-t) + We*Ke + Wp*Kp
where:
d
W - Weight of debt
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Kd - Cost of debt
We - Weight of Equity
Ke - Cost of Equity
Wp - Weight of Preferred Shares
Kp - Cost of Preferred Debt
Cost of equity – CAPM – Rf + Beta*(Rm-Rf)
i. Risk-free rate (Rf) – Rate on government securities, which of Indian 10 year bonds is
~7.8%.
ii. Beta – A measure of systematic risk, shows the variability with respect to the
benchmark.
Cost of debt (after-tax) = interest rate (1-tax rate)
Weighted Marginal Cost of Capital
The marginal cost of capital is the weighted average cost of the last dollar of new capital raised
by a company. It is the composite rate of return required by shareholders and debt-holders for
financing new investments of the company. It is different from the average cost of capital which
is based on the cost of equity and debt already issued.
Portfolio Management
i. Risk – Portfolio risk is the possibility that an investment portfolio may not achieve its
objectives
ii. Systematic risk – The risk which can’t be diversified. investors are compensated for it
by getting a higher return
iii. Unsystematic risk – The risk that is company/industry-specific, can be diversified and
investors should theoretically not be compensated for this.
iv. Portfolio return - It is the sum of the weighted average of the return on investment of
individual stocks in a portfolio:
Wa Ra + Wb Rb +..+ Wn Rn
where,
Wa - Weight of stock A
Ra - Return on Investment of stock A
Wb - Weight of stock B
Rb - Return on Investment of stock B
Wn - Weight of stock N
Rn - Return on Investment of stock N
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Portfolio Theory (Harry Markowitz Model) – shows that an investor can construct a portfolio
of multiple assets that will maximize returns for a given level of risk. Likewise, given the desired
level of expected return, an investor can construct a portfolio with the lowest possible risk.
Capital Market Line/Capital Allocation Line – It represents different combinations of Riskfree asset and portfolio of risky assets which provide max return for any given level of risk. All
investors, based on their risk & return preferences, would lie somewhere on the CML.
Security Market Line – graphical version of CAPM, depicting the relationship between beta
and required rate of return (positive). At 0 beta, rate is the risk-free rate
Financial Management:
a. Goal – The goal of Financial Management is to maximize shareholder wealth (dividends,
share price). This goal is superior to the maximization of firm profit (ignores risk). The
assumption is that the shares are traded in an efficient market where the effect of decisions
are reflected in share prices
b. Finance – This means the sourcing of funds. The souring can be from the public, private or
corporate entities.
c. Role of Finance Manager – The role of a finance manager is to make investment decisions
(Capital budgeting, WC management), financing decisions (capital/debt), and dividend
decisions (reinvest/distribute). Financial management is useful in almost every aspect of
business since all decisions have financial implications.
d. Economic Value/Capitalized Value – It is the present value of future cash flows discounted
at an appropriate discount rate.
e. Treasury Management – Treasury management means managing the liquidity & foreign
exchange requirements and risks.
f. Time Value of Money - It means that money today is worth more than money tomorrow. It
is based on the fact that money can earn interest if invested today, hence it will be worth
more than receiving the same amount of money tomorrow
g. Capital Budgeting – investments in fixed assets etc, i.e., where returns are expected over
multiple periods. Based on incremental after-tax CFs, not accounting profits (due to
ignorance of TVM, discrepancies in accounting treatment of depreciation, valuation etc).
Sunk costs are ignored and opportunity costs (including cannibalization) are included.
Financial CFs (debt, equity, interest etc) are ignored as raising funds results in an immediate
cash outflow for the project, thus, there is no net cash inflow. The cost of interest and
dividends is reflected in the WACC
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h. Capital Budgeting Evaluation Techniques - The different capital budgeting evaluation
techniques are - Payback Period (Cumulative cash inflow/cash outflow), Discounted
Payback Period, Net Present Value, Internal Rate of Return, Modified Internal Rate of
Return (takes care of the problem of IRR method of assumption of reinvestment at IRR by
assuming it at a discount rate by finding future values of all cash flows up to a terminal year
and discounting that value), Profitability Index (Total PV of all cash inflows/total PV of all
cash outflows, ie, in a way better than NPV for capital rationing as it standardizes profitability
for comparability)
Dividend Policy – Investors are expected to prefer current cash dividends to future capital
gains (arising from reinvestment). According to Walter, if ROI on reinvestment>cost of equity
capital, firms should retain entire profits and distribute entire profits if not.
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6
MARKETING
What is Marketing?
“Marketing is a social and managerial process by which individuals and groups obtain what
they need and want by creating and exchanging products and value with others” - Philip Kotler.
The basic purpose of marketing is to know and comprehend the customers and their needs
and wants thoroughly so that the product/service can sell itself.
Market:
A market is a place or common platform for the buyers and sellers to exchange goods, services,
information and other commodities. When any exchange of goods happens in return for money
or kind, it is called a transaction.
Market Segmentation: To identify and recognize the apt consumers to cater a product or
service by segregating them based on geographic, demographic, psychographic and
behavioural factors which have various needs and characteristics, a market is segmented.
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The Marketing Mix
The 7Ps of Marketing provides help to companies to review and define critical issues that affect
the product’s marketing.
▪
Products/Services: How well can you develop your products or services?
▪
Prices/Fees: Can our pricing model be altered?
▪
Place/Access: What are the different distribution mediums and options available for the
product to reach out to the customers?
o For example, online, in-store, mobile application, Virtual Reality etc.
▪
Promotion: How can we enhance the media channels effectiveness by adding to media
or replacing within paid, owned and earned media channels?
▪
Physical Evidence: How do we reassure the customers?
o For example, impressive buildings, secure options, great website etc.,
▪
People: Is there a technical or skills gap in our people that needs to be fixed?
▪
Partners: Are we actively looking out to new partners or are we managing existing
partners sufficiently well?
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THE SEVEN MAJOR TYPES OF PROMOTION:
1. Advertising
2. Direct Selling
3. Sales Promotion
4. Public Relations
5. Product Placement
6. Endorsement and Sponsorship
7. Guerrilla Marketing
SWOT Analysis:
A SWOT analysis assesses the internal and external environment in an organization. The
internal factors include the strengths and weaknesses, while the external factors look into the
opportunities and threats in an organization. It helps with strategic planning as well as decisionmaking.
Push strategy can be understood as pushing a product to the customer. It considers the
manufacturer’s sales requirements, trade and promotion expenses, or other means to make
the intermediaries to carry, promote and sell the product to end-users.
Pull strategy on other hand will pull the customers towards their product. The manufacturer
carries out various forms of communication like advertising, promotion and other, to persuade
consumers to demand the product from intermediaries thereby making the intermediaries order it.
This strategy is appropriate as it yields: increased brand loyalty more customer and brand
involvement the ability of customers to differentiate between brands
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▪
selection of brand by the customers before they visit the store.
PESTEL Analysis:
A PESTEL analysis is the tool or framework used to analyse and monitor the macroenvironmental (external marketing environment) factors that impact an organization. It helps to
identify the external forces impacting the market and analyse their impact on the business. This
analysis can be extended to work on the threats and weaknesses used in SWOT Analysis.
PESTEL stands for:
P – Political
E – Economic
S – Social
T – Technological
E – Environmental
L – Legal
Porter’s 5 Forces
The Competitive Forces Model is an important tool used in strategic analysis to analyse the
competitiveness in the industry. The model is more commonly referred to as the Porter’s
Five Forces Model, which includes the following five forces: intensity of rivalry, threat of
potential new entrants, bargaining power of buyers, bargaining power of suppliers, and
threat of substitute goods and/or services. In our competitive forces model, we include a
sixth force, the power of complementary goods and/or services providers. The model helps a
company understand the risks in the industry it is operating in and decide how it wants to
execute its strategies in response to competition.
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ANSOFF’s MATRIX :
The Ansoff Matrix also called as the Product/Market Expansion Grid, is a matrix tool used by
organizations to analyse, and plan the growth strategies and also to analyse the association of
risk with each of the strategies. The four strategies of Ansoff Matrix are:
Market Penetration: It focuses on increasing sales of an existing product to an existing market.
Product Development: It focuses on bringing new products to an existing market.
Market Development: It focuses on entering a new market using existing products.
Diversification: It focuses on entering an entirely new market by bringing new products
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Positioning map
It shows the location of the various product line items of the company.
Shows which items of the competitors are competing against yours.
Reveals possible locations for new items. It identifies market
segments.
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7
OPERATIONS
“The Science and Art of ensuring that the goods and services are created
and delivered successfully to the customers.”
Operations management refers to the business function responsible for planning, coordinating,
and controlling the resources needed to produce products and services for a company.
It may also be viewed as the study of a set of activities that creates value in the form of goods
and services by transforming inputs into outputs. It is concerned with planning, organizing, and
supervising in the contexts of production, manufacturing, or the provision of services.
Incorporating effective operations management techniques can help a company to:
1. Reduce the cost of products and services by being efficient.
2. Increase revenue through increased customer satisfaction in producing quality products &
services.
3. Optimally utilize the available resources.
4. Serve as a basis for innovation.
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Applications of Operations Management
Basic concepts
Lead time - Lead time represents the time between the moment the customer places the order
and the moment he/she receives it.
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Cycle time - Cycle time is the time gap between two consecutive outputs from a process, as
defined by you and your customer.
Bottleneck - Bottleneck is the resource/activity which has the highest utilization in a process.
Lean manufacturing – Integrated activities designed to achieve high volume production using
a minimal level of inventory.
CPM - The critical path method is one of the most frequently used and effective techniques in
project planning. When one is managing dozens of tasks, dependencies, and people, the
critical path method helps to keep the project on track and on budget, providing visibility into
the project. CPM is employed when the project has a certain start and end time i.e. it is a
deterministic model. It is, moreover, activity oriented.
PERT - Program Evaluation and Review Technique (PERT) is a technique adopted by
organizations to analyze and represent the activity in a project, and to illustrate the flow of
events in a project. PERT is a method to evaluate and estimate the time required to complete
a task within deadlines. PERT also illustrates the activities and interdependencies in a project.
PERT is mainly applicable when the time required to finish a project is not certain and we
estimate the optimum time. It is a probabilistic model and is event oriented.
Throughput time: It is the time required for a product to pass through a manufacturing
process, thereby being converted from raw materials into finished goods.
Flow rate/Throughput: The number of flow units (customers, money, produced
goods/services) going through the business process per unit time, e.g., served customers per
hour or parts produced parts per minute.
Supply Chain Management
Supply chain management is the management of the flow of goods and services and includes
all processes that transform raw materials into final products. It involves the active streamlining
of a business's supply-side activities to maximize customer value and gain a competitive
advantage in the marketplace.
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Logistics - It is the science of obtaining, producing, and distributing material and product in
the proper place and proper quantity.
Reverse Supply chain - Also known as Reverse Logistics, encompasses all operations
involved in the reuse of products and materials from the consumer to the vendor. This is done
to retain any use of a defective product.
Bullwhip effect - The bullwhip effect on the supply chain occurs when changes in consumer
demand cause the companies in a supply chain to order more goods to meet the new demand.
The bullwhip effect usually flows up the supply chain, starting with the retailer, wholesaler,
distributor, manufacturer, and then the raw materials supplier.
Inventory management – Inventory management is the process of ensuring that a company
always has the products it needs on hand and that it keeps costs as low as possible. Three
types of inventory: Raw materials, Work-in-progress, and Finished-goods.
Economic Order Quantity (EOQ) - A type of fixed-order-quantity model that determines the
amount of an item to be purchased or manufactured at one time. It is an inventory-control
technique that minimizes the total ordering and holding costs.
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Quality
TQM - It refers to a quality emphasis that encompasses the entire organization, from supplier
to customer. It is a continuous process that seeks to improve the quality of products and
services.
Benchmarking - It is the process of comparing one's business processes and performance
metrics to industry bests and best practices from other companies.
Just in Time JIT - It is one of continuous improvement and enforced problem-solving. JIT
systems are designed to produce or deliver goods just as they are needed. i.e. an inventory
control system in which the materials are delivered just in time before manufacturing.
Poka-yoke - A foolproof device or technique that ensures the production of good units every
time. It avoids errors and provides quick feedback on problems.
Quality Assurance (QA) - It is a set of activities for ensuring quality in the processes by which
products are developed.
Quality Control (QC) - It is a set of activities for ensuring quality in products. The activities
focus on identifying defects in the actual products produced.
Six Sigma
Six Sigma is one of the most important concepts in Operations management. It is a processdriven approach that emphasizes on continuous improvement and focuses on customer needs.
It is an approach to achieve less than 3.4 PPM defects by continuous improvement.
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There are two types of Six Sigma Processes:
- DMAIC: It stands for – Define, Measure, Analyse, Improve, and Control. This is used for
existing processes.
- DMADV: It stands for – Define, Measure Analyse, Design, and Verify. This is used for new
processes.
The following table gives the difference between compliance level of 99% and 99.99966% (i.e.
Six Sigma) process.
99% Good (3.8 Sigma) 99.99966% Good (Six Sigma)
5,000 incorrect surgical operations per week 1.7 incorrect surgical operations per week
No electricity for almost 7 hours each month One hour without electricity every 34 years
200,000 incorrect drug prescriptions each year 68 incorrect drug prescriptions each year
Lean operations
Lean operations eliminate waste through continuous improvement and focus on exactly what
the customer wants. It aims to achieve:
▪
Greater productivity
▪
Lower costs
▪
Shorter cycle times
▪Seven wastes
Higher quality - Overproduction, Queues, Transportation, Inventory, Motion, Over-processing,
and Defective product.
5S
- Sort, Simplify, Shine, Standardize and Sustain. It is a checklist for lean operations and
provides an easy vehicle with which to assist the culture change that is often necessary to bring
about lean operations.
Kanban
- It is the Japanese word for a card, which means “Signal”. A Kanban system moves
part through production via a “pull” from a signal.
Kaizen
- It is the Japanese word for change for the good. Continuous improvement in
manufacturing, engineering, and business improvement processes.
Statistics
Mean - The "mean" is the "average" that you're used to, where you add up all the numbers and
then divide by the number of numbers.
Median - The "median" is the "middle" value in the list of numbers. To find the median, your
numbers must be listed in numerical order from smallest to largest, so you may have to rewrite
your list before you can find the median.
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Mode - The "mode" is the value that occurs most often. If no number in the list is repeated,
then there is no mode for the list.
Population Variance - If the data are for a population (N), the average of the squared
deviations is called the population variance.
Sample Variance- It is a point estimator of the population variance σ2.
Sample Standard Variance- It is a point estimator of the population standard deviation
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8
STRATEGY AND
CONSULTING
What is Consulting?
Consulting is the business of offering advice and expertise to organizations, to help them
improve their business performance in terms of operations, profitability, management,
structure, and strategy. The demand for consulting roles is increasing exponentially resulting
in the emergence of consulting as one of the most pursued career options.
Management consultants help businesses improve their performance and grow by solving
problems and finding new and better ways of doing things. If you’re interested in how a
business works – its strategy, structure, management, and operations – a career in
management consultancy might be for you. You will be able to:
Rapidly Gain Exposure to Industries: You'll gain experience by working on projects in a vast
range of industries and with different clients and see how your decisions affect them.
Help Make Big-Picture Decisions: You’ll help guide your clients in making major decisions
that will affect their business.
Continuously learn: You’ll be working on projects that require you to continuously learn and
adapt to new trends in the industry.
Work in a team environment: You’ll have the chance of collaborating with people in your
organization and with the clients who have interests and expertise similar to yours.
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What's in it for you?
Skills needed to be a consultant
▪ Ability to multitask
▪ Ability to work in teams
Willingness to work long hours
▪ Travel enthusiast
Great Academics
▪
What
is Strategy?
▪
A strategy is an action that managers take to attain one or more of the organization's goals. It
is the creation of a unique and valuable position, including a different set of activities.
Strategic position emerges from three distinct sources:
Serving few needs of many customers
Serving broad needs of few customers
Serving broad needs of many customers in a narrow market (e.g., you choose to run
movie theatres only in cities with a population of less than 500000)
How to understand Strategy?
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Core Strategy Tools
1. SWOT Analysis
A structured planning method used to evaluate the strengths, weaknesses, opportunities,
and threats involved in a project or in a business venture.
Strengths: characteristics of the business or project that give it an advantage over
others.
Weaknesses: characteristics that place the business or project at a setback relative to
others.
Opportunities: elements that the business or project could exploit to its advantage.
Threats: elements in the environment that could cause trouble for the business or
project.
2. PESTLE analysis
A tool used by companies to analyze the environment in which they operate.
Political: - These factors determine the extent to which a government may influence the
economy or a certain industry.
Economic: - Rise in the inflation rate would cause companies to increase prices
Social: - These factors scrutinize the social environment of the market, and gauge
determinants like cultural trends, demographics, population analytics, etc.
Technological: - These factors pertain to innovations in technology that may affect the
operations of the industry and the market favorably or unfavorably Legal: - There are certain
laws that affect the business environment in a certain country.
Environmental: -These factors include all those that influence or are determined by the
surrounding environment.
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3. BCG Matrix
A matrix, developed by Boston Consulting Group in the early 1960s is used to plan market
strategies. The growth rate is determined by reference to market research, or it can be
estimated. “Competitive position” includes an assessment of the firm’s overall
market penetration and profitability compared to the other players in that market. Products
are then positioned in the four cells as shown in the figure.
Cash Cows: Large Market Share in a mature industry. It requires little investment.
Star: Larger Market Share in a growing industry. It may require investment to maintain
a lead.
Question Marks: Small Market Share in a growing market, Requires focus and
resources.
Dog: Small Market Share in a Mature industry. There is little prospect for gain.
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