Multi-Business Portfolio Case Interview: Capital Allocation Logic

A multi-business portfolio case interview tests whether you can allocate limited capital across several businesses using clear economic and strategic reasoning rather than intuition. These cases require comparing growth, risk, and returns across business units instead of optimizing a single profit driver. Interviewers look for disciplined capital allocation logic that mirrors how senior leaders make portfolio decisions. 

TL;DR – What You Need to Know

A multi-business portfolio case interview tests whether candidates can allocate capital across multiple businesses using consistent economic logic, risk assessment, and strategic prioritization.

• Interviewers evaluate capital allocation decisions by comparing business units on returns, growth potential, and risk under realistic capital constraints.
• Consultants frame portfolio strategy using forward-looking metrics such as return on invested capital and cash flow stability rather than historical budgets.
• Effective analysis ranks business units to force trade-offs instead of splitting capital evenly across the portfolio.
• Strong recommendations balance growth opportunities with risk, diversification effects, and strategic fit across the portfolio.

What a multi-business portfolio case interview tests

A multi-business portfolio case interview evaluates whether you can allocate capital across multiple businesses using consistent economic logic rather than intuition. In a multi-business portfolio case interview, interviewers assess how you compare returns, risk, growth potential, and strategic fit to prioritize investments under capital constraints.

These cases are used to test judgment at the enterprise level, not just problem solving within a single business. You are asked to think like a leadership team deciding where limited capital creates the most long term value.

Interviewers typically evaluate whether you can:

• Compare business units on a like-for-like basis using return on invested capital and cash flow profiles
• Balance growth opportunities against uncertainty and downside risk
• Recognize trade-offs instead of assuming every business can be funded

Unlike profitability or growth cases, the analysis is comparative. Capital invested in one business reduces what is available for others, which forces prioritization.

You are also expected to demonstrate portfolio thinking:

• Distinguishing cash-generating businesses from capital-consuming growth businesses
• Understanding diversification risk and earnings concentration
• Explaining why some businesses fund the portfolio while others absorb investment

Strong candidates treat this as a portfolio strategy case interview, using consistent metrics and clear logic to justify why capital should flow to specific businesses.

How consultants frame capital allocation decisions

Consultants frame capital allocation decisions by comparing businesses using forward-looking economic metrics rather than accounting labels or historical budgets. In a capital allocation case interview, the objective is to determine where incremental capital generates the highest risk-adjusted value across the portfolio.

The first step is clarifying the decision context. You should define the goal, such as maximizing long term value or stabilizing cash flow, and identify constraints like limited capital, risk tolerance, or time horizon.

Consultants typically apply three framing principles:

• Compare future economics rather than past performance
• Evaluate investments at the margin by focusing on incremental capital
• Force trade-offs by ranking opportunities instead of approving all projects

A common candidate mistake is treating capital allocation as a budgeting exercise. In interviews, it is closer to portfolio optimization, where capital flows to the highest value uses, not the loudest business unit.

To simplify comparisons, consultants standardize metrics:

• Return on invested capital to normalize businesses of different sizes
• Cash flow stability to understand funding capacity
• Diversification risk when one business dominates earnings

This framing ensures recommendations are structured, comparable, and defensible.

Capital allocation logic across a multi-business portfolio

Capital allocation logic across a multi-business portfolio focuses on directing limited capital to the businesses that create the most value per unit invested. In a multi-business portfolio case interview, this requires comparing business units using consistent economic logic rather than absolute profit levels.

The logic starts with unit-level economics. You evaluate how each business converts capital into cash flow and long term returns.

Most candidates structure this logic around three dimensions:

• Expected returns measured through return on invested capital and cash generation
• Risk profile including volatility, demand uncertainty, and operating leverage
• Growth potential based on market size, competitive position, and reinvestment needs

This is not a one-factor decision. A high-growth business with low current returns may still deserve investment if returns improve with scale. A mature business with stable cash flow may receive less growth capital but fund the rest of the portfolio.

Strong answers show portfolio awareness:

• Identifying which businesses fund the portfolio versus consume capital
• Explaining trade-offs between short term cash flow and long term growth
• Describing how capital allocation evolves as businesses mature

This demonstrates integrated portfolio thinking rather than isolated optimization.

How to determine capital allocation in case interviews

To determine capital allocation in case interviews, you should follow a structured ranking process that prioritizes business units by value creation under clear constraints. Interviewers expect transparent logic, not precise forecasts.

A practical approach includes:

• Clarifying the objective, such as maximizing value or reducing risk
• Identifying constraints like limited capital or risk tolerance
• Comparing businesses using consistent metrics such as risk-adjusted returns

Once comparisons are complete, you must rank investments rather than splitting capital evenly. This ranking mindset is central to any capital allocation framework consulting approach.

Interview cases typically provide limited data. You are expected to state assumptions clearly, request missing information, and sanity-check conclusions rather than rely on precision.

A simple hypothetical example:

• Business A generates 20 in annual cash flow on 100 invested capital
• Business B generates 10 in annual cash flow on 40 invested capital
    Even though Business A is larger, Business B delivers higher return on invested capital and may deserve incremental funding if risk is comparable.

Clear explanations matter more than math. Interviewers reward candidates who explain why one business outranks another using logic that holds under scrutiny.

Comparing growth, risk, and returns across business units

Comparing growth, risk, and returns across business units enables disciplined trade-offs instead of chasing the highest growth or safest option. In a portfolio strategy case interview, this comparison underpins credible recommendations.

Growth must be evaluated relative to capital intensity. High-growth businesses often require heavy reinvestment and carry execution risk, while stable businesses may generate predictable cash flow with lower upside.

Effective comparisons consider:

• Growth rate relative to capital required to sustain it
• Risk factors such as demand volatility, regulation, or competitive pressure
• Returns measured on incremental invested capital, not total profit

You should also explain portfolio interactions:

• Cash cows funding high-growth investments
• Diversification benefits across markets or customer segments
• Exposure concentration when one business dominates earnings

This shows you understand how portfolios create value through balance, not extremes.

Strategic fit and portfolio coherence considerations

Strategic fit and portfolio coherence influence capital allocation decisions beyond financial returns within a portfolio strategy context. Consultants assess whether investments strengthen the portfolio as a whole rather than optimize a single business in isolation.

Strategic fit typically addresses:

• Alignment with core capabilities and long term direction
• Synergies in operations, customers, or technology
• Impact on diversification risk and earnings stability

Portfolio coherence matters over time. A business with moderate returns may still receive capital if it stabilizes earnings or reinforces strategic positioning.

Demonstrating this thinking signals maturity. You show that capital allocation is not purely mechanical but guided by how businesses work together to create durable value.

Common mistakes in multi-business portfolio case interviews

Common mistakes in multi-business portfolio case interviews arise when candidates treat the problem as a math exercise instead of a strategic decision. These errors often undermine otherwise solid analysis.

Frequent pitfalls include:

• Splitting capital evenly without prioritization
• Ignoring capital constraints and assuming all projects are funded
• Focusing only on growth or only on risk

Another common issue is inconsistent comparison. Using different metrics for different businesses weakens recommendations.

Strong candidates avoid these mistakes by:

• Ranking investments clearly and explaining trade-offs
• Applying the same economic logic across all business units
• Linking recommendations back to portfolio value and strategic fit

Avoiding these errors helps you deliver clear, defensible answers that reflect how real capital allocation decisions are made in consulting interviews.

Frequently Asked Questions

Q: How do consultants allocate capital across multiple businesses in a case interview?
A: Consultants allocate capital across multiple businesses in a case interview by comparing risk-adjusted returns, capital intensity, and strategic relevance to decide where incremental investment creates the most value under capital constraints.

Q: How do you determine capital allocation in a case interview?
A: You determine capital allocation in a case interview by ranking business units based on return on invested capital, risk exposure, and cash flow impact rather than dividing capital evenly.

Q: What is the capital allocation method used in consulting interviews?
A: The capital allocation method used in consulting interviews relies on ranking business units using consistent forward-looking metrics and explicit trade-offs to allocate limited capital effectively.

Q: What is the rule of thumb for portfolio diversification in case interviews?
A: The rule of thumb for portfolio diversification in case interviews is to balance cash cows and growth engines to manage concentration risk while maintaining stable portfolio performance.

Q: How do consultants prioritize investments across business units?
A: Consultants prioritize investments across business units by comparing incremental returns, downside risk, and portfolio impact rather than absolute size or historical performance.