A Guide to Case Analysis

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to support your diagnosis. Work through the case preparation exercises on Case-TUTOR conscientiously or, if you are using study questions provided by the instructor, generate at least two pages of notes! 9. Develop an appropriate action plan and set of recommendations. Diagnosis divorced from corrective action is sterile. The test of a manager is always to convert sound analysis into sound actions—actions that will produce the desired results. Hence, the final and most telling step in preparing a case is to develop an action agenda for management that lays out a set of specific recommendations on what to do. Bear in mind that proposing realistic, workable solutions is far preferable to casually tossing out off-thetop-of-your-head suggestions. Be prepared to argue why your recommendations are more attractive than other courses of action that are open. You’ll find the case preparation exercises on Case-TUTOR helpful in performing this step, too.

Table 1

Key Financial Ratios: How to Calculate Them and What They Mean
Ratio
Profitability ratios 1. Gross profit margin

How Calculated
Sales – Cost of goods sold Sales Sales – Operating expenses Sales or Operating income Sales Profits after taxes Sales Profits after taxes + Interest Total assets

What It Shows
Shows the percentage of revenues available to cover operating expenses and yield a profit. Higher is better and the trend should be upward. Shows the profitability of current operations without regard to interest charges and income taxes. Higher is better and the trend should be upward.

2. Operating profit margin (or return on sales)

3. Net profit margin (or net return on sales) 4. Return on total assets

Shows after tax profits per dollar of sales. Higher is better and the trend should be upward. A measure of the return on total investment in the enterprise. Interest is added