Lumen Learning: Profits Down Despite Flat Revenue
Consulting
medium45 min0 submissionsGoogle
Scenario
Lumen Learning is a edtech business in India. The CEO has asked for help understanding a sharp fall in profitability.
Revenue moved from ₹990 Cr to ₹1030 Cr over the past year, while operating margin fell from 14% to 5% — a drop of 9 percentage points and roughly ₹87 Cr of operating profit.
What the finance team has established so far:
- Sales volume changed by -5%
- Average realised price changed by -2%
- Input costs per unit rose 20%
- Fixed overhead rose 13%
The COO believes the problem is "the sales team discounting too aggressively". The Head of Sales believes it is "procurement failing to control input costs". The CEO wants an evidence-based answer, not an argument.
Supporting data
drivers
- volume change pct
- -5
- fixed overhead change pct
- 13
- realised price change pct
- -2
- input cost per unit change pct
- 20
profit bridge
- revenue last year cr
- 990
- revenue this year cr
- 1030
- operating margin last pct
- 14
- operating margin this pct
- 5
Your task
Diagnose the profit decline and recommend a response. Provide:
- Analysis — structure the problem and isolate what actually drove the margin fall.
- Risks — what your recommendation depends on.
- Recommendation — prioritised actions with expected impact.
Show the arithmetic behind your conclusion.
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How you'll be graded
100 points, 60% to pass.
- root cause25
- recommendation25
- problem structuring25
- quantitative analysis25
Hint
Reveal suggested structure
Profit = (Price × Volume) − (Variable cost × Volume) − Fixed cost
- Decompose the change: how much of the margin fall is price, how much volume, how much unit cost, how much overhead?
- Size each driver before forming a hypothesis.
- Test the two stakeholder claims against the numbers.
- Prioritise by size of impact and speed of fix.