Harvard Business School Online
Core Business Essentials
Three modules, rebuilt from my own notes as pages you can poke at. Drag the price and watch revenue turn over. Delete an outlier and watch the mean move while the median sits still. Post a transaction and watch the balance sheet stay balanced.
One decision, three lenses
The modules are not three subjects. They are three passes over the same call — pick one and see what each pass asks.
We are thinking about cutting our price by 10% next quarter.
- 1. Economics
Is demand elastic at the price we charge today?
If a 10% cut brings more than 10% extra volume, revenue rises; if it brings less, you handed margin away for nothing. Elasticity above 1 says cut, below 1 says raise — and you also have to ask what the cut invites competitors to do back.
Open the module - 2. Analytics
How much do we actually know about that elasticity?
Run the cut as a randomised test in part of the market, not a company-wide guess. Report the result as a confidence interval so the room can see how wide the uncertainty really is before betting the quarter on a point estimate.
Open the module - 3. Accounting
Where does the cut land in the statements?
It hits gross margin first, then works through to net income in the pro-forma. Watch working capital too: more volume means more inventory and receivables tied up before any of it turns into cash.
Open the module
The modules
Three modules — one on demand and competition, one on evidence, one on the numbers that record both.
Concept index
Every idea in the three modules, one line each, linked to the part of the page where you can play with it.
- Willingness to pay (WTP)The most a customer would hand over for a product. Price is visible; WTP is not — which is the whole problem.
- Demand curveEvery buyer's willingness to pay, lined up highest to lowest. It slopes down because the next unit is always worth less than the last.
- ElasticityPercent change in quantity divided by percent change in price. Above 1, cutting price grows revenue; below 1, raising it does.
- Value stickWTP at the top, willingness to sell at the bottom. Everything between is value created; price and cost decide who keeps it.
- Sunk costMoney already spent and unrecoverable. It is real, it is on the books, and it belongs in no forward-looking decision.
- Opportunity costThe value of the best thing you gave up. Economic cost counts it; accounting cost does not.
- Economies of scaleFixed costs spread thinner as volume grows, so average cost falls. It is why some industries only hold a few firms.
- Market equilibriumThe one price where nobody is left wanting: no unserved buyer above it, no unsold seller below it.
- Price discriminationCharging different customers different prices to capture more of their surplus — and, oddly, shrinking deadweight loss while doing it.
- Where to play, how to winThe two questions every strategy reduces to: which slice of which industry, and on which attributes you beat the people already there.
- HistogramCounts of observations per range. Bin width is a choice you make, and it changes what you are able to see.
- SkewnessHow lopsided a distribution is. A long right tail drags the mean above the median; a long left tail does the reverse.
- OutlierA value far from the rest. Investigate it before you touch it — never delete or edit one just because it is inconvenient.
- Mean, median, modeThree answers to “where is the centre?”. The mean moves when an extreme value arrives; the median mostly does not.
- Coefficient of variationStandard deviation divided by mean. It is how you compare the spread of two data sets that are not on the same scale.
- CorrelationA number from -1 to +1 for the strength of a linear relationship. Near zero rules out a line, not a relationship.
- Hidden variableThe third thing driving both of the two things you are looking at. It is the usual reason a correlation is not a cause.
- Central Limit TheoremTake enough large samples of anything and their means land on a normal curve — regardless of the population's own shape.
- Standard errorσ divided by the square root of n. Quadruple the sample to halve it — the reason big samples buy precision so slowly.
- Confidence intervalA range built so that 95% of intervals built this way contain the true mean. It says nothing about the one in front of you.
- Accounting equationAssets = Liabilities + Owners' equity. What the business has, and who has a claim on it. It never breaks.
- Debits and creditsLeft and right, not good and bad. Debits raise assets and expenses; credits raise liabilities, equity and revenue.
- Accrual accountingRecord revenue when it is earned and expense when it is incurred, whatever the cash is doing that month.
- Matching principleA sale and the costs of making that sale belong in the same period, or the period's profit is fiction.
- Trial balanceEvery account with a balance, in one list. Total debits must equal total credits — the proof the books still hold.
- Real vs nominal accountsReal accounts carry forward to the balance sheet. Nominal accounts report one period to the income statement, then reset to zero.
- Accruals vs deferralsAccrual: cash moves after the entry. Deferral: cash moves before it. Both need an adjusting entry to land in the right period.
- Statement of cash flowsOperating, investing, financing. The pattern of the three signs tells you which stage of life a company is in.
- DuPont frameworkROE split into profit margin × asset turnover × leverage, so you can see which of the three is doing the work.
- Net present valueEvery future cash flow discounted back to today and netted off. One number for what a project is worth now.
30 of 30 concepts
How the course teaches
Inductive learning
Instead of “here is the knowledge, now go practice it,” every module starts with a messy problem and asks what knowledge you can pull out of it. Stretching past what you already know is the point — that is where new problem-solving approaches come from.
That is why these pages are built the way they are. Nothing here opens with a definition. Each section hands you something to move first, and the definition arrives once you have already seen what it describes.