SME Management Consultant Examination cheat sheet

GDP = C + I + G + (X − M); real GDP deflates nominal GDP by the GDP deflator, and the output gap = (actual − potential) ÷ potential GDP.

Fiscal multiplier = ΔY ÷ ΔG; it is larger when the marginal propensity to consume is high and smaller for open economies with high import propensity.

Monetary policy transmission: policy rate → short-term market rates → lending rates → investment and consumption; the Taylor rule sets the rate as r* + π + 0.5(π − π*) + 0.5(output gap).

Phillips curve trade-off: inflation and unemployment move inversely in the short run; expectations-augmented form implies no long-run trade-off at the natural rate of unemployment.

Exchange-rate pass-through: a 10% depreciation raises import prices roughly 10% in local currency; exporters gain competitiveness only if export prices are sticky in local currency.

Business cycle phases: expansion, peak, contraction, trough; leading indicators (orders, permits, yield spread) turn before coincident indicators (output, employment).

Regulatory impact: compliance cost is regressive for SMEs because fixed compliance costs are spread over smaller revenue; threshold effects create bunching below size cut-offs.

Trade policy: tariffs raise domestic prices by the tariff amount plus margin; quotas cap quantity and transfer rent to quota holders; both reduce consumer surplus.

Interest-rate parity: covered parity links forward premium to interest differential; uncovered parity predicts depreciation of the higher-yielding currency, though empirically it often fails.

Accounting equation: Assets = Liabilities + Equity; every transaction preserves it, and the double-entry rule debits increases in assets/expenses and credits increases in liabilities/equity/revenue.

Accrual basis: revenue is recognized when performance obligations are satisfied, not when cash is received; matching principle ties expenses to the revenue they generate.

Key ratios: current ratio = current assets ÷ current liabilities; quick ratio excludes inventory; debt-to-equity = total liabilities ÷ equity; interest coverage = EBIT ÷ interest expense.

DuPont decomposition: ROE = net profit margin × asset turnover × equity multiplier; it separates profitability, efficiency, and leverage effects.

Free cash flow to firm = EBIT × (1 − tax rate) + depreciation − capex − increase in net working capital.

NPV = Σ CFt ÷ (1 + r)^t − initial outlay; accept if NPV > 0; IRR is the discount rate making NPV = 0, and IRR can mislead when cash flows change sign.

WACC = (E ÷ V) × Re + (D ÷ V) × Rd × (1 − tax rate); use market values, and Re from CAPM = Rf + β × (Rm − Rf).

Break-even quantity = fixed costs ÷ (price − variable cost per unit); operating leverage rises with the fixed-cost share, amplifying profit sensitivity to sales.

Working capital cycle = days inventory outstanding + days sales outstanding − days payables outstanding; shortening it releases cash without changing reported profit.

Porter's five forces: rivalry, new entrants, substitutes, supplier power, buyer power; high combined force intensity compresses industry-average returns toward the cost of capital.

Porter's generic strategies: cost leadership, differentiation, and focus; being stuck in the middle yields below-average returns because the firm lacks both price and premium advantages.

Resource-based view: a resource yields sustained advantage only if it is valuable, rare, inimitable, and organized (VRIO); imitation barriers include causal ambiguity and path dependence.

BCG matrix: stars (high growth, high share), cash cows (low growth, high share), question marks (high growth, low share), dogs (low growth, low share); cash cows fund stars and selected question marks.

Ansoff matrix: market penetration, product development, market development, diversification; risk rises from penetration to diversification.

Organizational structures: functional (efficiency, silos), divisional (accountability, duplicated resources), matrix (dual reporting, role conflict); span of control widens as task standardization rises.

Mintzberg's five configurations include simple structure, machine bureaucracy, professional bureaucracy, divisionalized form, and adhocracy; coordination mechanism must fit the configuration.

Leadership contingency: Fiedler links effectiveness to leader style and situational favorability; situational leadership varies directive and supportive behavior with follower maturity.

Change models: Lewin's unfreeze–change–refreeze; Kotter's eight steps begin with urgency and end with anchoring in culture; resistance is predicted by perceived loss and low participation.

Little's Law: work-in-process = throughput rate × flow time; it applies to any stable system and lets a consultant infer WIP, cycle time, or throughput from the other two.

Capacity utilization = actual output ÷ design capacity; effective capacity subtracts planned downtime, and utilization above roughly 80–85% typically lengthens lead times nonlinearly.

EOQ = √(2DS ÷ H), where D is annual demand, S is order cost, and H is holding cost per unit per year; total cost is minimized where ordering cost equals holding cost.

Lean waste categories: overproduction, waiting, transport, overprocessing, inventory, motion, defects (plus unused talent); overproduction is considered the root waste because it creates the others.

Theory of constraints: identify the bottleneck, exploit it, subordinate non-bottlenecks, elevate capacity, then repeat; system throughput is set by the bottleneck, not by average capacity.

Quality: Taguchi loss function L = k(x − T)² penalizes deviation from target; Six Sigma targets 3.4 defects per million opportunities; PDCA is the standard improvement cycle.

Production planning: push (MRP) schedules from forecasts, pull (kanban) replenishes from consumption; MRP requires bills of materials, master schedule, and inventory records.

Layout choice: process layout suits high variety and low volume; product layout suits low variety and high volume; cellular layout groups dissimilar machines into part families.

Make-or-buy decision compares relevant variable cost plus avoidable fixed cost against purchase price, excluding sunk costs and allocated common fixed costs.

STP sequence: segmentation (group by needs, behavior, or demographics), targeting (evaluate segment size, growth, fit), positioning (own a distinct place in the customer's mind).

Positioning statement form: for [target], [brand] is the [frame] that [benefit], because [reason to believe]; it forces a single differentiated claim.

4Ps: product, price, place, promotion; extend to 7Ps for services with people, process, and physical evidence.

Price elasticity = % change in quantity ÷ % change in price; demand is elastic if |E| > 1, and revenue rises with a price cut only when demand is elastic.

Customer lifetime value = average margin per period × retention rate ÷ (1 + discount rate − retention rate); acquisition spending is justified only if CLV exceeds acquisition cost.

AIDA and funnel logic: awareness, interest, desire, action; conversion rate at each stage = next-stage count ÷ current-stage count, and the weakest stage caps overall yield.

Brand equity components (Aaker): awareness, perceived quality, associations, loyalty, proprietary assets; loyalty lowers price sensitivity and marketing cost.

Sales force sizing = total required customer calls ÷ calls per salesperson per period; territory design balances workload and potential.

Product life cycle: introduction, growth, maturity, decline; pricing shifts from skimming or penetration at launch to competitive pricing in maturity.

System types by management level: TPS (operations), MIS (tactical reporting), DSS (semi-structured analysis), EIS (executive), plus ERP integrating core transactions on a shared database.

ERP trade-off: integration and single source of truth versus implementation cost, process reengineering burden, and vendor lock-in; success depends more on process change than on software.

Data hierarchy: data → information → knowledge → decision; data quality dimensions include accuracy, completeness, timeliness, consistency, and uniqueness.

Digitization converts analog records to digital form; digitalization redesigns processes around digital data; digital transformation changes business models and value propositions.

Cloud models: IaaS (infrastructure), PaaS (platform), SaaS (application); deployment is public, private, or hybrid, and the shared-responsibility boundary determines who secures what.

Security triad CIA: confidentiality, integrity, availability; controls are preventive, detective, or corrective, and defense in depth layers them.

Process mining reconstructs actual process flows from event logs and compares them with the intended model to expose bottlenecks and rework.

Automation economics: automate tasks that are high-volume, rule-based, and stable; exceptions and judgment work remain with humans, so ROI falls as variability rises.

IT investment appraisal uses total cost of ownership (license, implementation, integration, training, operation) plus quantified benefits such as cycle-time and error reduction.

SME definitions are jurisdiction-specific and usually combine employee count and financial thresholds (turnover or balance sheet); a firm may be an SME in one country and large in another.

Policy rationales for SME support: market failure in credit (information asymmetry, weak collateral), scale disadvantages in compliance and procurement, and regional employment effects.

Credit guarantee schemes shift part of lender risk to a public guarantor; they raise access but require pricing and coverage limits to avoid moral hazard and adverse selection.

Policy instruments: grants, subsidized or guaranteed loans, tax incentives, vouchers for consulting or digital adoption, public procurement set-asides, and incubation or cluster programs.

Evaluation design: compare treated and control firms, account for selection bias, and measure additionality (outcomes that would not have occurred without support) rather than gross take-up.

Consulting implication: support eligibility is a threshold test, so verify size, sector, and age criteria before recommending a program; misclassification wastes client time.

Succession and business transfer policy addresses owner retirement and firm continuity; without transfer, viable firms close and employment is lost, a distinct failure from insolvency.

Public support for digitalization typically targets adoption gaps rather than frontier technology; diagnostic should separate awareness, capability, and financing barriers.

Diagnostic sequence: define the question, gather data, form hypotheses, test with evidence, synthesize findings, recommend actions with owners and timing.

MECE principle: issue trees should be mutually exclusive and collectively exhaustive, so branches do not overlap and together cover the whole problem.

Profit decomposition: profit = revenue − cost; revenue = volume × price; cost = fixed + variable; this isolates whether the problem is price, volume, or cost driven.

Issue tree vs logic tree: issue trees break the problem into questions; logic trees break an argument into premises; hypothesis trees test a proposed answer first.

Root-cause tools: 5 Whys, fishbone (people, process, machine, material, method, measurement), and Pareto analysis, which targets the few causes producing most of the effect.

Interview discipline: ask open questions first, probe for evidence and examples, avoid leading questions, and record verbatim quotes for later triangulation.

Benchmarking compares against internal history, competitors, or best practice; differences must be normalized for scale and mix before conclusions are drawn.

Recommendation quality: specific action, accountable owner, timeline, expected quantified impact, and key risk; unsupported adjectives and vague verbs are defects.

Engagement risk: scope creep, data access limits, and client capability gaps; agree on deliverables, decision rights, and success metrics at kickoff.