Finance Prep for Non-Finance MBAs

Finance Prep for Non-Finance MBAs - One step at a time

Meet the Mentor

Navaneeth K P is a seasoned strategy professional with MBA from IIM Ahmedabad and Engineering from BITS Pilani. With over a decade of experience in top-tier consulting and supply chain roles at EY-Parthenon, Ernst & Young, and Capgemini Consulting, he brings deep expertise in corporate strategy and operational transformation.

The setting

Sonalika (name changed) is a high-potential candidate: an Engineering graduate with experience at Amazon and Tata Consumer Products, currently pursuing an MBA at a top business school.However, despite her strong background in operations and marketing, she had a clear gap in her skillset. As she admitted during the session, “I’m very bad at finance.” She wanted to get into the Strategy & Transactions Team in Ernst & Young.

This session, led by Mentor Navaneeth K P, demonstrates how to pivot from “fearing the numbers” to “reading the story behind the numbers.” Lets go through the interview!

The Introduction

Navaneeth K P: Tell me something about yourself.

Student : Hello. Okay.
So I’ll quickly introduce myself. I’m Sonalika. I completed my BBA in my undergrad and worked with Amazon for two years before joining XX BSchool. At XX BSchool, I did my summer internship at Tata Consumer Products as a commerce marketing intern.

I have a very holistic CV. I worked in operations, and later, when I came to my MBA, I pivoted to marketing. I’ve also done a few live projects in sales strategy, market entry, and market sizing strategy. This is briefly about me.

I’ve also worked with an NGO. I generally do a lot of social service and was a very active part of an NGO until my undergrad.

Navaneeth K P: So why consulting?

Student: So for me, I never explicitly worked in a consulting firm… but the way I see it is that consulting is about breaking down problems, right? I’ve always used this in my life, even before I understood what consulting actually is. Breaking down a problem and coming to a solution has always been my thing, and I like it.

So I wanted to go into consulting during my summers itself, but that did not happen. So I did a live project in consulting as well. It was a very small live project for a month, but I really enjoyed my work there. I understood that consulting is all about the way you see the problem, right? How do you get an approach? How do you do it in a structured way? So implicitly, I’ve done that everywhere. I’ve broken down how to launch new products in my internship, how to build strategy in my live projects, and how to develop new tools in my Amazon work experience. So I think I’ve been implicitly doing it, and…I want to make it my long-term career. So I think that’s my reason.

Navaneeth K P: Can you explain the project that you did as part of the consulting internship—that one-month project? What was it?

Student: So the consulting project that I worked on was a live project. My role there was to help with the supply side of the project. The problem statement was that we wanted to understand the market size of plant protein producers in India.

Navaneeth K P: Okay.

Student: We divided the problem into demand and supply sides. The team I supported was working on the supply side. First, we did primary research. We took plant-based products and understood who the manufacturers behind them were.

So we created a list of manufacturers, tried cold calling them, and understood what they were manufacturing and what the end products were. That was our primary research. For secondary research, we went to websites like IndiaMART and Good Food, got a list of manufacturers—basically protein ingredient manufacturers.

I compiled the list, did cold calling, and asked them why they were producing plant protein, what their end products were, and why they were in this space. I collected all the numbers, formulated them in Excel, and then shared the sizing number with my project lead and that completed my project.

The Finance Turn

Navaneeth K P: Interesting. In your opinion, why does a firm go bad? Why do they run into losses and then erosion of net worth? Why does it happen?

Student: Yeah, I think… okay, so why do firms generally go bad? Let’s take the hotel industry, for example. When many firms start, I think they plan it well initially, but in the long run, they don’t see how they want the firm to be positioned in the sector. I’ve seen this trend regularly.

A lot of firms start off well, but at some point, they don’t plan their finances properly, or they don’t see upcoming trends or competitors clearly. Somewhere they lag, and their growth either becomes stagnant or declines. Mostly, I think it’s because they don’t keep up with trends.

I think every firm should have both long-term and short-term goals. Maybe they are fine with short-term goals, but they don’t think beyond that—about what the long-term market will look like or what competitors will look like. That’s where they fall behind.

Navaneeth K P: So here, you’ve assumed that the firm is doing a lot of things right and has the right intent, but they fail to see changing markets. That’s what’s driving the problem. What else can go wrong? Have you come across any news where firms have gone belly up—recently in India or anytime you remember? Can you recollect any cases?

Student: Yes. A lot of firms—for example, Café Coffee Day—they were running into losses because they had a lot of debt.

Navaneeth K P: Okay.

Student: They couldn’t clear the debt. For many firms, this happens—they go into losses because they can’t repay loans. They either shut down the firm or sell it to someone else, usually a bigger firm, through acquisition. I think in this case as well, because of the debt, they couldn’t repay it.

Navaneeth K P: Why did they have high debt?

Student: I don’t clearly know, but as per my understanding, they had high debt because they had branches all over the country. The business wasn’t generating enough to meet maintenance costs, and they weren’t able to generate enough revenue even to break even.

So I think the money they took was allocated to opening new franchises.

Navaneeth K P: What do you think they did with the debt—the money they took?

Student: They used it for expansion, yes.

Navaneeth K P: Right. And it didn’t click.

Student: Yes, it didn’t click. Because of that, they went into more debt. Instead, maybe they could have focused on what they already had.

Navaneeth K P: Are you comfortable with corporate finance?

Student: Not really.

Navaneeth K P: Not really. But I need to identify where candidates stand in terms of their knowledge of finance.

Student: Ohh ok…I mean I have read – yeah.

Navaneeth K P: So what is the difference between levered cash flow and unlevered cash flow?

Student: No idea.

Navaneeth K P: Would you be able to recognize what levered cash flow is or what unlevered cash flow is?

Student: Again, as per the name, whatever I understand is the amount allocated for the amount…

Navaneeth K P: Okay. What is cost of capital? Who gives it?

Student: It is the amount required to run the firm. Whatever the cost is, it depends from firm to firm. Either they take it from banks or…

Navaneeth K P: You’re right. Somebody is giving money to run the business, and there is a cost attached to giving that money. Who pays whom?

Student: They invest on their own if they have enough money. So it’s basically the amount required to run the entire operations, and however much they invest is the cost of capital.

Navaneeth K P: Okay. Let’s say—do you understand oil exploration? They explore whether there is oil in a given terrain. There is an oil exploration company and there is a retail company. For oil exploration, let’s say someone like Reliance’s oil exploration business, not the refinery part.

Student: Okay. Yes.

Navaneeth K P: Between these two, which one do you think has a higher cost of capital, and why? I’m not talking about the absolute level of capital deployed.

Student: I think oil exploration, maybe they’ll have a lot of capital because… yeah.

Navaneeth K P: I agree. But that has nothing to do with the sector. You can have a big firm or a small firm in any sector. I’m not talking about the absolute level. I’m asking about the cost. You said cost of capital is the money you pay to get capital. So given that, between a retail firm and an oil exploration firm, who will typically have a higher cost of capital?

Student: Maybe a retail firm.

Navaneeth K P: Why wouldn’t this be true for an oil exploration firm? Which business is more risky in your evaluation?

Student: I think oil is more risky.

Navaneeth K P: So if it’s inherently more risky, and you are an investor, you’d be more easily convinced to invest in a retail firm than in an oil exploration firm, right?

Student: Yes, definitely.

Navaneeth K P: And in that sense, you’re willing to settle for lower returns from a retail firm because you’re more assured of returns. In oil exploration, they may take your money, drill, and say there’s no oil—so no returns. That’s how you should conceptualize cost of capital. It is inherently higher for firms that are more risky.

Student: Okay.

Navaneeth K P: And that’s important for this practice because we deal with distressed firms. Distressed, high-debt firms typically attract a higher cost of capital because they are riskier investment ideas.

Student: Hmm.

The Feedback - On Intro

Navaneeth K P: So, let’s pause here. Allow me some time to give you feedback. When you tell me about yourself, you gave a good answer. You summarized it well.

You’re giving an overview of what you’ve done. My thought is—how can we make it more of a hook? That’s the first hook, right? We have to get the panel hooked in the first two minutes. So what can you say from your CV that will get them hooked?

Student: Okay. And how do I do that?

Navaneeth K P: My approach is always to emphasize professional credentials in the first one-and-a-half to two minutes. You should emphasize your transferable skills, given that you haven’t directly worked in a financial advisory role. Talk about what is transferable from your internships, past experience, and curricular activities, and then highlight that.

So things like sectoral knowledge—you could say, “I’ve interned in one of the listed retail firms in India in their category account management function. I handled the coffee category, tea, atta, beauty care—whatever it is that you handled.” You should mention that.

It sends a very clear message in the first line that this person understands the retail sector and understands the product category.

Student: Yeah.

Navaneeth K P: The second hook you can throw is that you understand marketing and sales as a function, or account management as a function. You can say you dealt with key account management, modern trade, e-commerce, general trade, GTM—whatever it is that you did. Explain it in a manner that emphasizes the transferability of your skills.

Or you emphasize execution skills—for example, “I handled a complex transformation in account management at Tata, where they were moving from an old, highly manual operating model to a more digitized one.”

You could say, “I was responsible for driving execution on the ground. We built consensus among five sets of top stakeholders within the firm and delivered the project within budget and timelines.” Something interesting that excites them.

So what you are implying, is that, “I may not know enough corporate finance, but I can drive projects on the ground. It’s just a matter of time before I pick up finance.”

Even I didn’t know finance when I graduated from IIM Ahmedabad. I didn’t know what DCF was. I still wonder how I passed corporate finance.

Student: Yeah, same. I’m very bad at finance, but I’m confident I can learn. I just need to crack the—

The Feedback - On Not Knowing Finance

Navaneeth K P: Even if there are things you don’t know, don’t say that upfront. Let them ask finance questions. If you’re not able to answer, come back by saying, “I know my finance answer wasn’t great, but please appreciate my sectoral knowledge and execution skills and give me a chance.” You should be able to deliver that pitch.

Student: How do you think I can do that? That’s what I’ve been wondering since yesterday.

Navaneeth K P: That’s exactly the pitch I just gave. It’s up to them whether they take you or not. But you should show that you can sit in front of a stranger and advance your agenda. That’s what consulting is about. You’ll sit with CFOs and push them to do certain things or defend your firm’s position.

Student: Do you think I should mention in my intro itself that I’m not great at finance?

Navaneeth K P: No. Let them find it out.

Student: Okay.

Navaneeth K P: Even in consulting, that’s a bad idea. You don’t go to a client upfront and say your output is bad. Most of the time, we don’t even know what the client wants. Even when there’s an agreed scope, we don’t know what will finally work.

But sometimes, what the client wants is already in your output—even if you think it’s insufficient. So it’s fine.

The Feedback - Step by Step Learning Finance

Navaneeth K P: Now, I want you to pick up some analysis tonight. Download a balance sheet and P&L. Do trend analysis. Learn basic ratios—cash conversion days, days sales outstanding, days inventory outstanding, DPO. CCC equals DSO plus DIO minus DPO.

You should be able to do basic working capital analysis. Learn profitability ratios like net margin and gross margin, and how to interpret them.

If you Google “ratio analysis,” you’ll find many ratios. They’re broadly classified into three or four groups depending on the source. Learn a few from each group. You should be able to comment on profitability, efficiency, cash management, and liquidity.

Working capital ratios are essential. Learn cash conversion days and cash conversion ratios. Cash conversion days is a working capital concept. Cash conversion ratio is EBITDA to operating cash flow.

Navaneeth K P: It tells you—if you generate ₹100 of profit, how much gets converted into cash in the same period. In this example, it’s going down from 11% to 2%. Their ability to generate cash is deteriorating rapidly. That’s terrible.

Student: Okay.

Navaneeth K P: Inventory analysis—you divide sales by 365. When you convert it into ratios, you see the story clearly. They were at 78 days of inventory, now they’re holding 100 days. That looks bad.

Student: Yeah.

Navaneeth K P: That’s the power of ratio analysis. The absolute numbers gave one message, but ratios change the story.

Student: Yeah.

Navaneeth K P: Working capital is inventory plus DSO minus DPO. Overall working capital could improve, but only because if you delay vendor payments. They’re collecting cash faster, but inventory management is off. That’s the story. So we’ll pause here. I hope you have your next steps. All the best.

Student : Thanks a lot. This really helps and I feel confident now.