Solution to Growth and Fixed Costs
Authors: Karen E. Robinson and Hanna Starobinets
Things to notice about the financial statements:
- There is enough information to match the company profiles to the financial
statements, and so put the financial statements in order.
- The number "614050" appears frequently and is in a different font. This
should be the most notable thing about the cash flow statements.
- When the statements are put in order, the tax amounts (in the statement of
operations) can be converted to numbers to read "Taxes form a red herring."
- Some lines in the Statement of Assets & Liabilities don't add up right:
they're off by a number between 1 and 26.
Given the above, the steps to solving this puzzle are:
Match statements to company descriptions
This gives an ordering of the financial statements.
The keys to matching are:
- Size of a company: there are a few initial revenue numbers: 100,000; 50,000; 30,000; 10,000.
- Speed a company gets paid or pays its bills: "Receivables days" and "payables days" are well-defined concepts.
- Amount of inventory a company holds: Restaurants, for instance, hold inventory only for a few days because most of it is perishable.
Note that the puzzle should be solvable without knowing those things in advance, since "payables days", "receivables days", and "inventory days" are referred to in a company description, and these are google-able.
- Interest paid on loans: higher by customers of First Wonderland, lower by customers of the Standard Bank.
- "Intangible assets" or brand worth, held by companies with consumer brands
- "Goodwill" some companies have accumulated by acquiring companies for more than the acquisitions' book
- And a few special items, such as:
- legal fees awarded from one company to another
- dividends paid by companies owned by the Red Queen or White King
Find errors in the financial statements; convert to letters
These are lines that don't "add up". Each statement has a line off by a value < 26; these can be converted to letters (1 = A, 2 = B, etc) to spell the clue phrase "SEARCHHBSPHARVARDEDU" or Search hbsp.harvard.edu.
Search for the out-of-place number
If you search hbsp.harvard.edu for "614050"—every company's cash balance at the end of the period, the only number introduced that's not a multiple of 100, and the amount of other items such as legal fees or goodwill—you'll find a case titled "MIT Mystery Hunt: The Answer is SECONDARY".
A full solution, including annotated company statements, is available in PDF form.