# MBA Error Log: [Your programme, term or course] > A mistake journal for the MBA core: one log table for every error you make in problem sets, cold calls, case > write-ups, practice exams and recruiting cases; a seven-type MBA error taxonomy to classify each one; a catalogue of > 25 classic business misconceptions (confusing profit and cash, ranking projects by IRR, mishandling sunk costs, > averaging percentages and more) each with the fix and the card that teaches it; fix-it drills; and a weekly review > routine. It is for MBA students in the core year, admitted students working through the pre-MBA primers, and > recruiting candidates who want each mistake to happen only once. > Source basis: retrieval and spacing research (Roediger and Karpicke 2006; Cepeda et al. 2006; Dunlosky et al. 2013) > and the reflective-practice tradition (Kolb 1984; Schön 1983), written in our own words. All companies and numbers are > fictional. Replace every [bracketed] value and every row marked *Example*. ## Document control | Field | Value | |---|---| | Programme and term | [Full-time MBA, core term 1, School A (fictional)] | | Learner | [Your name] | | Courses covered | [Financial accounting, corporate finance, microeconomics, ...] | | Period covered | YYYY-MM-DD to YYYY-MM-DD | | Reviewed by | [Learning team member, tutor or coach] | | Version | [0.1] | ## Why an MBA error log works The MBA core moves fast: a new case or problem set almost every day, across six or more courses at once. In that pace, a mistake that is corrected in class and then forgotten usually returns, because the wrong idea is still the first one your memory offers under time pressure. Writing the mistake down, naming its type and its root cause, and turning the fix into a short rule that you later test yourself on replaces the wrong idea through retrieval practice and spacing, the two techniques Dunlosky et al. (2013) rate as having the highest utility. The log also shows patterns that grades hide. If most of your errors are "set-up" errors in finance (wrong cash flows, wrong discount rate), more practice problems help less than re-reading the cash-flow rules on the cards. If most are "communication" errors in case write-ups, the analysis is fine and the fix is a recommendation-first structure. Kolb (1984) describes learning as a cycle of experience, reflection, abstraction and new experiment; the log makes each step explicit: the error is the experience, the root cause is the reflection, the fix rule is the abstraction and the re-test is the experiment. ## MBA error taxonomy | Type | What went wrong | Typical example | Usual fix | |---|---|---|---| | Reading the question or case | misread what was asked, given or assumed | answered "should we enter?" when the question asked "how should we enter?" | restate the question in one line before starting | | Concept | wrong idea about what a quantity or framework means | treated depreciation as a cash outflow | re-learn the card, explain it aloud with an example | | Set-up | wrong model, wrong cash flows, wrong comparison | discounted a project at the company WACC although its risk differs | write the decision rule and the relevant flows before computing | | Calculation | right set-up, arithmetic or formula slip | divided by the margin instead of by the contribution per unit | estimate the size first, then check the result | | Excel | wrong function, sign, range or convention | `=NPV(rate, CF0:CF5)` discounting year 0 one period | add a check cell, compare with a hand calculation | | Judgement | right numbers, weak assumptions or recommendation | recommended the higher-IRR project of two mutually exclusive ones | stress-test assumptions, ask "what would change my mind?" | | Communication | right analysis, unclear message | a write-up that ends with the recommendation on page 3 | answer first, then three supporting points | Classify in this order, stopping at the first "no": ```mermaid flowchart TD A["Did I read the question and case facts correctly?"] -- "No" --> R["Reading the question or case"] A -- "Yes" --> B["Did I understand the concept behind it?"] B -- "No" --> C["Concept"] B -- "Yes" --> D["Did I choose the right model and inputs?"] D -- "No" --> S["Set-up"] D -- "Yes" --> E["Were the numbers computed correctly?"] E -- "No" --> F{"By hand or in Excel?"} F -- "By hand" --> K["Calculation"] F -- "Excel" --> X["Excel"] E -- "Yes" --> G["Was the recommendation sound?"] G -- "No" --> J["Judgement"] G -- "Yes" --> M["Communication"] ``` ## Error log | ID | Date | Source (short) | My answer | Correct answer | Type | Root cause | Fix rule | Re-test | |---|---|---|---|---|---|---|---|---| | ERR-001 *(Example)* | YYYY-MM-DD | Accounting PS3 Q2, Northfield Outdoor Co. (fictional) | "Net income 120, so operating cash is about 120" | operating cash flow is -70 (receivables +150 and inventory +80 absorb cash, depreciation 40 is added back) | Concept | equated profit with cash | "Profit is an opinion of performance; cash needs the working-capital bridge" | YYYY-MM-DD | | ERR-002 *(Example)* | YYYY-MM-DD | Finance practice exam Q4 | chose project S (IRR 30%) over L (IRR 25%) | choose L: NPV at 10% is 136.36 against 18.18 | Judgement | ranked mutually exclusive projects by IRR | "Mutually exclusive: rank by NPV, or check incremental IRR" | YYYY-MM-DD | | ERR-003 *(Example)* | YYYY-MM-DD | Corvane Robotics (fictional) model, finance team assignment | `=NPV(10%, B2:B7)` with year 0 in B2 | `=NPV(10%, B3:B7)+B2` | Excel | Excel NPV discounts the first value one period | "Excel NPV starts at year 1: add CF0 outside" | YYYY-MM-DD | | ERR-004 *(Example)* | YYYY-MM-DD | Managerial accounting cold call | "drop the line, it loses 50" | keep it: it contributes 150 to fixed costs that stay anyway | Set-up | used allocated fixed costs in a drop decision | "Drop decisions: compare avoidable costs only" | YYYY-MM-DD | | ERR-005 *(Example)* | YYYY-MM-DD | Operations case write-up, Tallow Creek Medical Center (fictional) | "add a nurse at triage" | the bottleneck is the physician step; triage capacity is not binding | Reading the question or case | did not compute capacity of every step | "Capacity of each step first, then act on the minimum" | YYYY-MM-DD | | ERR-006 *(Example)* | YYYY-MM-DD | Strategy write-up feedback | five forces listed, no conclusion | one line: which forces make the industry less profitable and why | Communication | description instead of analysis | "Every framework ends with a 'so what' sentence" | YYYY-MM-DD | | ERR-[NNN] | YYYY-MM-DD | [Source] | [My answer] | [Correct answer] | [Type] | [Root cause] | [Fix rule] | YYYY-MM-DD | | ERR-[NNN] | YYYY-MM-DD | [Source] | [My answer] | [Correct answer] | [Type] | [Root cause] | [Fix rule] | YYYY-MM-DD | Re-test record: | Error | Re-test 1 (date, new problem, right or wrong) | Re-test 2 (date, right or wrong) | Closed | |---|---|---|---| | ERR-002 *(Example)* | YYYY-MM-DD, two warehouse layouts of different scale, right | YYYY-MM-DD, right | Y | | ERR-[NNN] | YYYY-MM-DD, [ ] | YYYY-MM-DD, [ ] | [ ] | ## Error profile Counting errors by type tells you where your next study hour pays most. In the fictional term below (28 errors), concept, set-up and judgement errors dominate. The learner should spend the next week on the concept cards and on writing the decision rule before every calculation, not on more arithmetic practice. ```vega-lite { "$schema": "https://vega.github.io/schema/vega-lite/v5.json", "description": "Errors by type in one core term for a fictional MBA student (28 errors).", "width": 360, "height": 200, "data": {"values": [ {"type": "Reading", "count": 2}, {"type": "Concept", "count": 6}, {"type": "Set-up", "count": 5}, {"type": "Calculation", "count": 3}, {"type": "Excel", "count": 4}, {"type": "Judgement", "count": 5}, {"type": "Communication", "count": 3} ]}, "mark": "bar", "encoding": { "x": {"field": "type", "type": "nominal", "sort": "-y", "title": "Error type"}, "y": {"field": "count", "type": "quantitative", "title": "Errors logged"} } } ``` | Course | Errors this term | Most frequent type | Focus card for next week | |---|---|---|---| | *Example:* Corporate finance | 9 | Set-up | mba/mba-dcf-valuation-card | | [Course] | [ ] | [ ] | [mba/...] | ## Catalogue of 25 classic MBA misconceptions | # | Misconception | Correct idea and fix | Card that fixes it | |---|---|---|---| | 1 | Profit and cash are the same thing | accrual profit ignores the timing of collection and investment; in the ERR-001 example, net income 120 with receivables up 150, inventory up 80 and depreciation 40 gives operating cash flow of -70 | mba/mba-cash-flow-statement-card | | 2 | Depreciation is a cash outflow | it spreads the cost of an asset already paid for; it affects cash only through lower taxes | mba/mba-three-statements-card | | 3 | Revenue is earned when cash arrives | revenue is recognised when the performance obligation is satisfied (IFRS 15, ASC 606), which may be before or after payment | mba/mba-three-statements-card | | 4 | A product line with a reported loss should be dropped | compare only avoidable costs: revenue 500, variable cost 350 and allocated fixed cost 200 shows a loss of 50, but dropping the line removes a contribution of 150 | mba/mba-relevant-costs-card | | 5 | Money already spent is a reason to continue | sunk costs cannot be recovered by any choice; decide on future cash flows only (Arkes and Blumer 1985 document the bias) | mba/mba-relevant-costs-card | | 6 | Calling a cost "sunk" when it is not | a machine bought for 400 that could be resold for 120 still carries a 120 opportunity cost; cancellable commitments and tax effects of past outlays are still relevant | mba/mba-relevant-costs-card | | 7 | Cost per unit is a fixed number | with fixed costs, average cost falls as volume rises; use contribution margin for volume decisions | mba/mba-cvp-breakeven-card | | 8 | Rank mutually exclusive projects by IRR | IRR ignores scale and timing: S (-100, +130) has IRR 30% and NPV 18.18 at 10%; L (-1,000, +1,250) has IRR 25% and NPV 136.36; choose L. The incremental flow (-900, +1,120) has IRR 24.44%, above 10% | mba/mba-npv-irr-card | | 9 | Mixing nominal cash flows with a real discount rate | discount nominal flows at a nominal rate and real flows at a real rate (Fisher 1930) | mba/mba-dcf-valuation-card | | 10 | Subtracting interest from project cash flows and then discounting at WACC | WACC already prices financing; counting interest again double-counts it | mba/mba-capm-wacc-card | | 11 | One company-wide WACC for every project | the discount rate follows the risk of the project, not of the firm | mba/mba-capm-wacc-card | | 12 | Debt is cheaper, so more debt always lowers WACC | without taxes and frictions, the cost of equity rises to offset it (Modigliani and Miller 1958); with taxes the shield is traded off against distress costs | mba/mba-capital-structure-card | | 13 | The average of two percentages is the overall percentage | weight by the base: margins of 10% on revenue 1,000 and 30% on revenue 100 average 20% unweighted but 11.82% overall | mba/pre-mba-quant-refresher | | 14 | +20% then -20% returns to the start | the second change applies to a larger base: 1.2 × 0.8 = 0.96, a net change of -4% | mba/pre-mba-quant-refresher | | 15 | The arithmetic mean of growth rates is the compound growth rate | +50% then -50% averages 0% but the compound annual growth rate is -13.40% | mba/pre-mba-quant-refresher | | 16 | Markup and margin are the same | cost 60 and price 80 give a markup of 33.3% on cost and a margin of 25.0% on price | mba/pre-mba-quant-refresher | | 17 | Correlation in business data proves causation | without an experiment or a credible design, confounders and reverse causation remain | mba/mba-regression-for-managers-card | | 18 | Raising price always raises revenue | revenue falls when demand is elastic ($\lvert \varepsilon \rvert > 1$) | mba/mba-demand-elasticity-card | | 19 | Market share causes profitability | share and profit can share causes (cost position, product quality); value created and captured is the test | mba/mba-competitive-advantage-card | | 20 | 100% utilisation is efficient | with variable arrivals and service, queues grow without bound as utilisation approaches 100%: in an M/M/1 queue the average line is 3.2 at 80% and 18.05 at 95% | mba/mba-queueing-card | | 21 | Speeding up any step speeds up the process | only the bottleneck sets capacity: steps of 40, 30 and 50 per hour give 30 per hour, and raising the first step to 60 still gives 30 | mba/mba-process-analysis-card | | 22 | The five forces are a checklist to fill in | they are an analysis of industry profitability; end with which forces hold returns down and what a firm can do | mba/mba-five-forces-card | | 23 | Negotiation is about dividing a fixed pie | most deals have several issues valued differently; trade them to create value before claiming it | mba/mba-negotiation-guide | | 24 | Paying people more always motivates them | pay is mainly a hygiene factor (Herzberg 1959); motivation also comes from the work itself (Hackman and Oldham 1976) | mba/mba-motivation-card | | 25 | Legal means ethical | the law sets a floor; ethical analysis asks about duties, consequences and stakeholders beyond compliance | mba/mba-ethics-guide | ## Fix-it drills Each drill takes one wrong statement, names its error type, explains why it is wrong and rewrites it. **Drill A (fully worked).** A teammate's pricing slide for Northfield Outdoor Co. (fictional): "Unit cost is USD 60; we target a 40% margin, so price at USD 84." 1. Error type: concept (markup confused with margin, misconception 16). 2. Why it is wrong: USD 84 is cost plus 40% of cost, a 40% markup. Its margin on price is 24 / 84 = 28.6%, not 40%. 3. Correct price for a 40% margin on price: $p = c / (1 - m) = 60 / 0.60 = 100$. Excel: `=60/(1-40%)` returns 100. 4. Rewrite: "Unit cost is USD 60; a 40% margin on price requires a price of USD 100 (a 66.7% markup on cost)." 5. Fix rule: "Margin divides by price, markup divides by cost: say which one." **Drill B (half worked).** Survey summary from Tallow Creek Medical Center (fictional): "Satisfaction was 90% in the inpatient survey (400 responses) and 50% in the emergency survey (100 responses), so overall satisfaction is 70%." 1. Error type: [ ]. 2. Why it is wrong: the two percentages have different [ ], so a simple average gives each survey equal weight. 3. Correct overall rate: $(0.90 \times 400 + 0.50 \times 100) / 500 =$ [ ]. Excel: `=SUMPRODUCT(B2:B3,C2:C3)/SUM(C2:C3)`. 4. Fix rule: [ ]. **Drill C (unsolved).** From a finance team memo on Corvane Robotics (fictional): "We have already spent USD 2m on the prototype line, so abandoning it now would waste that money; we should spend the remaining USD 1.5m to finish it." Name the error type(s), explain what is wrong, say which information you would need to decide, and rewrite the argument. **Mixed set (interleaved).** Mark each statement right or wrong; for wrong ones, give the misconception number. 1. "Our receivables doubled while profit rose, so operating cash flow may have fallen." 2. "Project A has the higher IRR, so it creates more value than mutually exclusive project B." 3. "Sales grew 10% last year and 30% this year, so compound growth was 20% a year." 4. "Running the clinic at 98% utilisation minimises waiting time." 5. "The allocated head-office charge is irrelevant when we decide whether to close a store, unless closing removes it." 6. "Debt is cheaper than equity, so moving from 20% to 60% debt must lower our WACC." ## Weekly review routine | Step | Time | What to do | |---|---|---| | 1 | 5 min | Count new errors by type and by course; update the profile chart values | | 2 | 10 min | For each error due for re-test, solve a new problem of the same kind without notes; record right or wrong | | 3 | 5 min | Close errors with two correct re-tests at least a week apart; reschedule the rest (+3 days if wrong) | | 4 | 5 min | Read the catalogue entries that match this week's concept, set-up and judgement errors | | 5 | 5 min | Turn each new fix rule into a flashcard; choose next week's focus card from the most frequent type | Where to find new problems for re-tests: Exercise C in each `mba/*-card`, the mini-cases in each `mba/*-guide`, your course's past exams, and the drills in mba/pre-mba-quant-refresher. Use a different company and different numbers from the original error, so that you test the rule rather than your memory of one answer. Bring your top two errors to the learning team: explaining them to others is itself retrieval practice. ## Self-test questions 1. Name the seven error types in the order you should check them. 2. You entered `=NPV(8%, B2:B6)` with the year 0 outlay in B2. Which type is this, and what is the fix rule? 3. Your recommendation picked the cheaper supplier but ignored a delivery risk raised in the case. Which type? 4. When is an error closed in this log? 5. State the correct idea for misconception 6 in one sentence. ## My notes and next steps Most frequent error type this term: [ ]. Course with most errors: [ ]. Focus card for next week: [mba/...]. Errors still open: [ ]. Question for the teaching assistant or learning team: [ ]. ## Sources and further reading - Roediger, H. L., and Karpicke, J. D. (2006). Test-enhanced learning: taking memory tests improves long-term retention. *Psychological Science*, 17(3), 249–255. - Cepeda, N. J., Pashler, H., Vul, E., Wixted, J. T., and Rohrer, D. (2006). Distributed practice in verbal recall tasks: a review and quantitative synthesis. *Psychological Bulletin*, 132(3), 354–380. - Dunlosky, J., Rawson, K. A., Marsh, E. J., Nathan, M. J., and Willingham, D. T. (2013). Improving students' learning with effective learning techniques. *Psychological Science in the Public Interest*, 14(1), 4–58. - Kolb, D. A. (1984). *Experiential Learning: Experience as the Source of Learning and Development*. Prentice Hall. - Schön, D. A. (1983). *The Reflective Practitioner: How Professionals Think in Action*. Basic Books. - Arkes, H. R., and Blumer, C. (1985). The psychology of sunk cost. *Organizational Behavior and Human Decision Processes*, 35(1), 124–140. - Modigliani, F., and Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. *American Economic Review*, 48(3), 261–297. - Herzberg, F., Mausner, B., and Snyderman, B. B. (1959). *The Motivation to Work*. Wiley. - Hackman, J. R., and Oldham, G. R. (1976). Motivation through the design of work: test of a theory. *Organizational Behavior and Human Performance*, 16(2), 250–279. - Fisher, I. (1930). *The Theory of Interest*. Macmillan. - Further reading (by name only): Berk and DeMarzo, *Corporate Finance*; Brealey, Myers and Allen, *Principles of Corporate Finance*; OpenStax *Principles of Accounting* (CC BY-NC-SA 4.0). ## Answer key **Drill B.** 1: concept (misconception 13, averaging percentages without weights). 2: bases (numbers of responses). 3: $(360 + 50) / 500 = 0.82$, so 82.0%, not 70.0%. 4: "Average percentages by weighting with their bases." **Drill C.** Judgement error driven by the sunk-cost fallacy (misconception 5). The USD 2m is spent whatever the decision. The decision needs the future cash flows of finishing (the remaining USD 1.5m plus expected inflows from the line), the value of the best alternative (for example resale or reuse of the prototype equipment, misconception 6), and the risk of the project. Rewrite: "The USD 2m spent is sunk. Finishing the line is worthwhile only if the present value of its future inflows exceeds the remaining USD 1.5m plus the value we give up from the best alternative use of the prototype assets." **Mixed set.** 1 right (misconception 1). 2 wrong (8). 3 wrong (15: the compound rate is $\sqrt{1.10 \times 1.30} - 1 = 19.58\%$, close to but not 20%; the gap grows with volatility). 4 wrong (20). 5 right (4 and 6). 6 wrong (12). **Self-test.** 1. Reading the question or case, concept, set-up, calculation, Excel, judgement, communication (calculation and Excel are checked at the same step: by hand or in the spreadsheet). 2. Excel. Fix rule: "Excel NPV starts at year 1: write `=NPV(8%, B3:B6)+B2`." 3. Judgement: the numbers were right but an assumption the case raised was not tested. 4. When you solve a new problem of the same kind correctly on two re-tests at least a week apart. 5. A past outlay is sunk only to the extent no current choice can recover it; any resale value, cancellable commitment or tax effect that still depends on the decision is a relevant cash flow. ## Revision history | Version | Date | Author | Change | |---|---|---|---| | 0.1 | YYYY-MM-DD | [Name] | First version from template | | [0.2] | YYYY-MM-DD | [Name] | [Started core term 2 log] | ## Standard and licence note Structure aligned with the retrieval, spacing and reflective-practice research cited above (Roediger and Karpicke 2006; Cepeda et al. 2006; Dunlosky et al. 2013; Kolb 1984; Schön 1983). The taxonomy, catalogue, drills and examples are original text written for this library; the fictional companies and numbers are invented. This template is not affiliated with or endorsed by any business school, publisher or accreditation body; check your own course's rules on practice materials and collaboration. Template licence: MIT.