Case Interview Glossary

This is note just for people with non-business backgrounds.

I get a lot of emails from people saying I'm totally new to the world of business, how do I learn about the business world in 4 days.

Okay, so that's a tough challenge.

I usually say, start reading the Wall Street Journal, Forbes and Fortune magazines and Google any terms or concepts you don't understand.

It occurred to me that this is somewhat time consuming process and somewhat difficult to do in just a few days.

So I have this random idea to assemble perhaps a dictionary or glossary of common business terms and what they mean.

My goal is not to create a massive business dictionary as that I'm sure has already been done by others.

My goal is to define maybe the 30 - 50 most important terms someone totally new to business really should be familiar with.

In addition, I'm also toying around with the idea of assembling a compilation of business concepts or business "patterns" that anyone who has been in business for years, would know... but someone new to business would not recognize.

So for example, "industry consolidation" is a term describing lots of small businesses merging with each other so that an industry with lots of little companies ends up being an industry with very few, but very big players.

Example: US Auto Industry many years ago had 300+ auto manufacturers, today there are 3 main, very large ones.

So that's my example of a definition.

What I was thinking in terms of "business concept" is toexplains HOW industry consolidation typically occurs, whatare the common challenges for the smallest companies in the industry and what are common opportunities for the largest.

So the idea is if one were to ever have an industry consolidation type of case in an interview, the goal would be to have you have at least an INTUITIVE and CONCEPTUAL idea of what typically happens in these situation -- ultimately allow you to form ahypothesis earlier in the case process.

So here is my challenge.

I've been in the business world since I was 8 years old.

At the dinner table when I was in the 3rd grade, my brother and parents all talked about operating margins, fixed cost structures and the like (my parents were business owners, so my mom taught me if overhead costs are too high, Victor there is no money left for groceries and food for you and your brother).

Okay. Got it.  High Overhead = Bad  (at least in many cases)

So business terminology is so intuitive to me that it is very hard for me at this point to distinguish between what is truly common knowledge to everyone in society versus what is actually business knowledge that needs to be specifically acquired.

So, I have a few questions to ask of you -- especially IF the business world is new to you.

1) What business terms or jargon are you or were you most confused by?

2) What general business concepts (not necessarily case interview concepts) do you / did you find confusing?

If you could be kind enough to post a comment related to this blog post (feel free to use your first name only or your initials), it would certainly help me help you better. Just fill out the comment box below with any feedback you might have on this.  Thanks a bunch!

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15 comments… add one
  • CH Dec 8, 2010, 4:12 pm

    This might not be a perfect fit for what you want, but profit margins always tripped me up. The intuitive idea (how much of your revenue is profit?) made sense, but when, in a case, the interviewer said “OK, the firm wants profit margins of at least 33%, how much do they need to charge” I realized that I had no idea how to find it.

  • KD Dec 8, 2010, 4:22 pm

    Well certainly two of the terms mentioned above were totally alien to me prior to watching your workshop videos: fixed cost structures and overhead.

    Still not entirely sure about what fixed cost structures are only that they are something to do with fixed cost vs variable cost and when a company has a high fixed cost this means high barrier to entry for potential entrants..

    So yes what exactly does the Vs mean in fixed vs variable? Why are they measured against each other?

    Still not entirely sure how to ‘determine industry supply’ – is it something to do with working out supplier power..?

    Initially I was not entirely sure what marginal meant when applied to costs and profits- know now it can apply to an increase or decrease in either (I hope!)

  • Amar Dec 8, 2010, 4:35 pm

    Confusing Business concepts
    1) Price evaluation – how to determine an optimal price for a new product based on the “value” that it brings to the customers.
    2) How to bring about organization change (such as making HR process more efficient) – I have heard of the acronym PODS – but don’t really know how is “data” different than “system”.
    3) Insurance/reimbursement process in healthcare is especially confusing.

    Confusing terms:
    1) COGS
    2) Sales – is it revenue or only number/volume of goods sold?

    A.

  • Amar Dec 8, 2010, 4:36 pm

    Confusing Business concepts
    1) Price evaluation – how to determine an optimal price for a new product based on the “value” that it brings to the customers.
    2) How to bring about organizational change (such as making HR process more efficient) – I have heard of the acronym PODS – but don’t really know how is “data” different than “system”.
    3) Insurance/reimbursement process in healthcare is especially confusing.

    Confusing terms:
    1) COGS
    2) Sales – is it revenue or only number/volume of goods sold?

    A.

  • dp Dec 8, 2010, 4:53 pm

    Contribution margin

  • S.B Dec 8, 2010, 4:55 pm

    – top line vs. bottom line
    – cannibalization
    – joint venture vs. merger vs. acquisition
    – fixed vs. variable costs
    – premium
    – company income vs. profits (same thing?)
    – synergy
    – leverage

    Thanks..this is a really great idea! I have more or less already looked up most of this stuff, but hearing from a fresh perspective never hurts!

  • Warren Dec 8, 2010, 5:23 pm

    Economies of Scale, and Synergy,
    are these measurable? Or are these just fancy words to throw around?

    CAPEX and OPEX, what are the differences? and why does it matter?

    Thanks!

  • David Dec 8, 2010, 5:57 pm

    Growth: sounds intuitive but often used very ambiguously. For people lacking experience, “high growth countries” may very well mean 3 different things.

  • Rd Dec 8, 2010, 6:35 pm

    Net present value / time value of money/ npv positive
    discounting
    Capex and opex
    Marginal cost curve
    Hurdle rate

  • GC Dec 8, 2010, 6:48 pm

    M. Cheng,

    I think the hardest is making a clear distinction between jargon terms that are used in the same context.

    For instance :

    – cash flows
    – revenue
    – earnings
    – income
    – value creation

    All sound the same to someone new to business.

    You have to spend the most of your time differentiating words you would use in the same sentence when explaining something to a client, because context doesn’t help inside a same idea.

    My 2 cents.

  • Namit Dec 8, 2010, 7:00 pm

    economies of scale, joint venture, price discrimination

  • Vebjoern Dec 10, 2010, 6:24 am

    – M&A (Mergers & Acquisitions)
    – CSR (Corporate Social Responsibility)
    – Definitions and differences: Analyst, business analyst, associate and partner.

  • Vebjoern Dec 10, 2010, 7:13 am

    – Private Equity
    – Banking (is it just trading stocks?)
    – Boutique firm

  • Candy Chan Dec 13, 2010, 8:54 am

    profit margin

  • saro May 17, 2012, 10:18 am

    – gross profit
    – gross margin
    – gross profit margin
    – HHI (Herfindahl-Hirschman Index)

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