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A profitable distributor that borrowed to grow its cash

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

An electronics distributor in Saudi Arabia (fictional, SAR millions) made a net profit of 40. Depreciation was 10, and it wrote off an old IT system worth 5 (no cash moved). Receivables rose 35, inventory rose 20 and payables rose 15. It spent 18 on new warehouses, took a new bank loan of 25 and paid dividends of 12. It started the year with 30 of cash. Build the cash flow statement and say what it tells you.

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Change in cash = operating + investing + financing (this comes from the question: where did the cash come from and go)
- Operating: profit, plus non-cash costs, minus cash tied up in working capital
- Investing: the warehouses
- Financing: the new loan minus dividends
- Quality check: operating cash flow as a share of net profit

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Operating cash flow
What a strong candidate does: Profit 40, plus depreciation 10 and the write-off 5, minus receivables 35 and inventory 20, plus payables 15.
Operating cash flow (SAR millions): 40 + 10 + 5 - 35 - 20 + 15 = 15
Step 2: Investing cash flow
What a strong candidate does: The warehouses send 18 out. Free cash flow is operating cash flow minus this capex.
Free cash flow (SAR millions): 15 - 18 = -3
Step 3: Financing cash flow
What a strong candidate does: The new loan brings 25 in; dividends send 12 out.
Financing cash flow (SAR millions): 25 - 12 = 13
Step 4: Closing cash
What a strong candidate does: Opening 30, plus operating 15, minus investing 18, plus financing 13.
Closing cash (SAR millions): 30 + 15 - 18 + 13 = 40
Step 5: Cash conversion
What a strong candidate does: How much of the profit arrived as operating cash.
Operating cash flow as a share of net profit (percent): 15 ÷ 40 × 100 = 37.5

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

Cash rose by SAR 10 million, but the business did not earn that increase: free cash flow was minus 3 million, and the rise came from a 25 million bank loan. Only 37.5 percent of the profit arrived as cash, because receivables grew by 35 million, almost as much as the profit itself. This means the company is paying a dividend out of borrowed money. The risk is that some receivables are never collected, in which case today's profit is overstated. As a next step, check how old the receivables are and which customers owe the most.

Risks a strong answer names: Receivables that are never collected would turn into write-offs; The new loan adds interest and must be repaid.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.