Session 13a: Post Class tests

  1. The first step in telling a story is assessing the landscape. It is important to do this because
  2. It provides the basis for the story
  3. It puts constraints on the story and provides the template for differentiating between the possible, plausible and the probable.
  4. It forces you to think about the competitors and what they might do in response to your company’s actions
  5. It gives you a foundation for assessing the risk in your story
  6. All of the above
  7. In telling a business story, i.e., the story that is the basis for your valuation, the first priority is to
  8. Be creative
  9. Have lots of interesting characters and to introduce twists
  10. Keep it simple and focused
  11. Fashion a happy ending
  12. Have a hero
  13. Once you have a story for a company, you have to measure it on whether it is possible, plausible and probable. In your story, your start-up company get an 80% market share of a splintered, very large and very competitive market without any significant competitive advantages of its own. Which of the following best describes your story.
  14. The story is possible, plausible and probable
  15. The story is possible and plausible but not probable
  16. The story is possible but neither plausible nor probable
  17. The story is not possible, plausible or probable
  18. None of the above

4.  If the story that you are telling is about a large basic goods company with a strong brand name in a mature market, which of the following inputs would you expect to see in your valuation:

  1. Low revenue growth, low profit margins and low risk
  2. Low revenue growth, high profit margins and low risk
  3. High revenue growth, high profit margins and low risk
  4. High revenue growth, high profit margins and low risk
  5. Low revenue growth, high profit margins and high risk
  6. Low revenue growth, high profit margins and high risk
  7. Your story about a company and the value that emerges from that story can change over time because
  8. The company releases new information about its products and operations.
  9. The company gets a new CEO
  10. A competitor changes its business strategy and/or product offerings
  11. An activist investor takes a position in a company, with the intent of pushing for change
  12. All of the above.


Session 13a:: Post class test solutions

1.  e. All of the above. Understanding the market that a company operates in and who its competitors are is key to every aspect of both storytelling and converting the story into numbers.

2.  c. Keep it simple and focused. There are no brownie points for being creative, having interesting characters or a hero. However, if you can bring these into a simple and focused story, it will be more compelling.

3.  c. The story is possible but neither plausible nor probable. It can happen since the market share is not greater than 100% but it is not plausible (the market is very competitive and you don’t have any significant competitive advantages) or probable.

4.  b. Low revenue growth, high profit margins and low risk. The company is a large company in a mature market (low revenue growth), has a strong brand name (high margins) and sells basic goods (low risk).

5.  e. All of the above. Every one of these could change your story in small or big ways. New information or a competitive action can lead to a shift in your views on the company’s strengths or weaknesses, a new CEO can chart a new course for the company, the appearance of an activist investor can increase the likelihood that the company will have to respond with changes.