The first part of this question can be seen here: Financial Analyst Interview Questions. This is part 2. We highly recommend that you read the first part of the question before reading this part, but if you choose not to, then read the paragraph below to understand the question better (otherwise you can just skip the part below):

## Financial Analyst Interview Question part 2

We are a tutoring/student coaching company that partners with colleges and universities to coach their students to be more successful in school, typically beginning in the student’s first year. The colleges and universities are our clients.

Below we present some sample data from one of our clients. In order to show our client how effective our coaching is, we separated students into 2 different groups – 1 group in which **all** of the students received coaching and another group (also called the “control” group), in which **NONE** of the students received any coaching. The term “control” group is a scientific term used when comparing the effect of a particular treatment on some group of people (or whatever it is that’s being studied), versus people who did not receive that treatment. In this case, that “treatment” is our coaching/tutoring service for colleges.

*Comparing Coached retention to Control retention provides the basis for measuring our enrollment impact and return on investment in coaching. Retention is just a term that refers to the percentage of students that were “retained”, or basically the percentage of students who stayed in school and made it to their next year in college.
*

In the tables below, we have enrollment numbers for people who started their 1st and 2nd years in both the coached and non coached groups.

*We have separated the 2 tables by not “at risk” students and “at risk” students. At risk students are those students who are already at risk of not making it to their 2nd year in college, because they have a history of poor academic performance.
*

Enrollment by group and year, NOT “AT RISK” | ||
---|---|---|

Group | Began 1st year in college | Began 2nd year in college |

Coached | 90 | 85 |

Not Coached (“Control” Group) | 130 | 108 |

Enrollment by group and year, “AT RISK” only | ||
---|---|---|

Group | Began 1st year in college | Began 2nd year in college |

Coached | 90 | 70 |

Not Coached (“Control” Group) | 70 | 47 |

## Financial Analyst Interview Question part 2 A: *Given the figures above, how many 2nd year students are still in college due to our coaching?*

If the Not “At Risk” Coached students were not coached, then they would have the 83.1% (108 people who made it to 2nd year/130 who started 1st year = .831) Retention Rate of the Control group, which would be .831*90 = about 75. Retention rate is simply the percentage of students within a given group that make it to their 2nd year in college. The difference between the 85 who did pass in the Coached group and the people who did not get Coached is 85-75, which equals 10 students. This means that because of Coaching, 10 students made it through, which incurs tuition of $20K*10. If the “At Risk” Coached students were not Coached, then they would have the 67.1% Retention Rate of the Control group, which would be .671*90 = about 60. The difference between the 70 who did pass in the Coached group and the people who did not get Coached is 70-60, which equals 10 students. This means that because of Coaching, 10 students made it through, which incurs tuition of $20K*10. The Total Number of students who passed because of Coaching is the sum of the individual groups – 10 + 10 = 20.

## Part B: If tuition is $20000 a year, how much extra revenue is that for the client college?

That will be 20 * $20,000 = $400,000.

## Part C: If we had charged $1,000 per student to coach these freshmen for one year, how much ADDITIONAL revenue does the client get to keep (minus the cost of the coaching)?

Since there were 180 students who went through coaching, that would be 180*$1,000 = $180,000, which is the cost of coaching. This means that the additional revenue is $400,000 – $180,000 = $220,000.

## Part D: What’s the “return on investment” (profits / costs)?

The ROI is $220,000/$180,000 = 122%.

## Part E: We meet to present our results to client… The client begins the meeting by saying that they are looking for ways to be more efficient with their budget and suggest that next year we only coach “at-risk” students. What would you say to them?

We would say that based on the data above, coaching “at risk” students is just as effective as coaching “not at risk” students. This is because in each group, the same exact number of students (10 – which we calculated in part A above) made it to their 2nd year because of coaching, and each group started with the same number (90) of coached students – so we can compare the numbers without having to use percentages. So, because of the fact that coaching is just as effective for “not at risk” students as “at risk students”, we could tell the client that they would actually be ** losing** money by not coaching the “not at risk” students – because the extra revenue that the 10 additional students (10*$20K = $200K) brings in far exceeds the cost of coaching the 90 students in the “not at risk students” (90 * $1,000 = $90,000) group.

## Part F: Based on what you’ve found, what would you tell a new client who wants to create a coached and control group, but ensure that all the “at-risk” students are in the coached group because they most need the support from coaches?

Based on the above case study, we could tell the client that having both “At Risk” and Not “At Risk” students would yield roughly equal results from coaching, because the retention rates for both “at risk” and “not at risk” students is roughly the same.

Now that you’ve gone through all the questions and answers, you can see how some very simple numbers can turn out to be quite complex. And, what’s even more interesting is how the numbers can help support a business in claiming how effective their services are – in this case those services are simply their coaching and tutoring. Even though this question was asked in the context of a financial analyst interview, the analytical skills applied here can be used by virtually any profession.

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