It is crucial to understand that consultants test your ability to solve a specific business problem in a case interview and not your knowledge of corporate finance. Accordingly, the main parameters you are judged are structural thinking, logic, and data skills. However, solving a business problem in an interview, as in real life, may require knowledge of the basics of corporate finance:
- Basic understanding of how investment projects are estimated (for example, NPV, IRR, payback period): imagine that in a case you need to assess the attractiveness of investments in a particular business. To do this, you need to estimate revenue and costs and understand how to properly compare them with each other, taking into account the change in the value of money over time (for example, calculate NPV). They don't expect complicated calculations from you, such as discount rates - they need to ask the interviewer which speed to use.
Basic understanding of the income statement structure (P&L): for example, you will get a case related to cost optimization. To successfully solve it, you need to understand what types of costs exist (fixed and variable; production costs, marketing, and administrative costs). It is not necessary to know all the intricacies of accounting or management accounting.
- All the calculations that they expect from you can be done in your head - accordingly, you will not need a complex IRR calculation.
- Before starting the calculations, clarify the approach with the interviewer - it may turn out that you are going to calculate NPV. Still, for this case, a simple payback period will be enough.
- Do not hesitate to clarify incomprehensible economic terms with the interviewer. This is ok.
- And remember - as a rule, consulting employees work with a wide variety of education, not only with an economic one: for example, graduates of technical universities or philologists-orientalists. Lack of in-depth knowledge of corporate finance did not prevent them from successfully passing the interview