SME Management Consultant Examination flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Output gap

The percentage difference between actual and potential GDP. A negative gap signals slack and downward inflation pressure; a positive gap signals overheating and upward pressure.

Fiscal multiplier

The change in equilibrium output caused by a one-unit change in government spending or taxes. It is larger when consumption propensity is high and imports are low.

Phillips curve

The inverse short-run relationship between inflation and unemployment. Expectations-augmented versions imply no permanent trade-off at the natural rate of unemployment.

Regulatory threshold effect

Firms bunch just below size cut-offs that trigger heavier compliance duties. Fixed compliance costs fall disproportionately on small firms, creating a growth disincentive.

Accrual accounting

Revenue is recorded when performance obligations are satisfied and expenses when incurred, regardless of cash timing. It improves matching but requires estimation and judgment.

DuPont analysis

Decomposes return on equity into net profit margin, asset turnover, and equity multiplier. It shows whether returns come from profitability, efficiency, or leverage.

Free cash flow to firm

EBIT times one minus the tax rate, plus depreciation, minus capital expenditure, minus the increase in net working capital. It measures cash available to all capital providers.

Weighted average cost of capital

The market-value-weighted average of after-tax debt cost and equity cost. It is the discount rate for projects of average risk and falls as tax shields rise.

Operating leverage

The sensitivity of operating profit to sales, driven by the fixed-cost share. High leverage magnifies gains in upturns and losses in downturns.

VRIO framework

A resource sustains advantage only if it is valuable, rare, hard to imitate, and supported by organization. Failing any criterion caps the advantage.

Porter's five forces

Rivalry, entrants, substitutes, supplier power, and buyer power jointly determine industry profitability. Strong forces push average returns toward the cost of capital.

Ansoff matrix

Four growth options: market penetration, product development, market development, and diversification. Risk generally increases from penetration toward diversification.

BCG growth-share matrix

Classifies businesses as stars, cash cows, question marks, or dogs by market growth and relative share. Cash cows fund stars and selected question marks.

Matrix organization

Employees report to both functional and project or product managers. It improves coordination across expertise but creates role conflict and slower decisions.

Little's Law

Work-in-process equals throughput rate multiplied by flow time. Knowing any two quantities lets a consultant compute the third in a stable process.

Economic order quantity

The order size minimizing the sum of ordering and holding costs: square root of two times annual demand times order cost, divided by holding cost per unit.

Theory of constraints

System throughput is limited by its bottleneck. Identify the constraint, exploit it, subordinate other resources, elevate it, then repeat the cycle.

Taguchi loss function

Quality loss equals a constant times the squared deviation from the target value. Any deviation, not only out-of-spec output, incurs cost.

Push versus pull planning

Push systems schedule production from forecasts, as in MRP. Pull systems replenish from actual consumption, as in kanban, limiting excess inventory.

Capacity utilization

Actual output divided by design capacity. Very high utilization lengthens lead times nonlinearly because variability consumes the remaining slack.

Price elasticity of demand

Percentage change in quantity divided by percentage change in price. Demand is elastic when the absolute value exceeds one, so a price cut raises revenue.

Customer lifetime value

Average margin per period times retention rate, divided by one plus discount rate minus retention rate. It sets the ceiling for justified acquisition spending.

STP process

Segmentation groups customers by needs or behavior; targeting selects attractive segments; positioning creates a distinct place in the target customer's mind.

Sales force sizing

Total required customer calls divided by calls a salesperson can make per period. Territory design then balances workload against customer potential.

Digitalization versus digitization

Digitization converts analog records to digital form. Digitalization redesigns processes around digital data, while transformation changes business models and value propositions.

ERP system

Integrated software sharing one database across core transactions. It provides a single source of truth but demands process redesign and carries lock-in risk.

Process mining

Reconstructs actual process flows from system event logs and compares them with the intended model, exposing bottlenecks, rework, and compliance deviations.

CIA triad

Confidentiality, integrity, and availability are the core security objectives. Controls are preventive, detective, or corrective and are layered in defense in depth.

Credit guarantee scheme

A public or mutual body shares lender risk on SME loans. It improves access but needs coverage limits and risk-based pricing to limit moral hazard.

Additionality in SME policy

The outcome that would not have occurred without public support. Evaluation compares treated firms with a control group to separate true impact from selection effects.

MECE issue tree

A problem breakdown whose branches are mutually exclusive and collectively exhaustive. It prevents overlap and ensures the whole question is covered.

Pareto analysis

Ranks causes by contribution to an effect, typically showing that a minority of causes produces most of the outcome. It focuses improvement effort where impact is largest.