Learning objectives
By the end of the week you can:
- Trace any company's value chain end-to-end (inputs → transformation → distribution → customer → cash), marking where margin pools, who carries inventory and receivables, and when cash actually arrives relative to costs.
- Classify any revenue engine into the six archetypes (transactional, recurring/subscription, marketplace/take-rate, advertising, licensing/royalty/franchise, usage-based), state each archetype's characteristic economics (gross-margin shape, marginal cost of the next unit, capital intensity, working-capital sign, the KPI that matters, the characteristic leak), and decompose hybrid stacks (Apple, Amazon, Eternal) from segment disclosures.
- Walk ₹1/$1 of revenue down the P&L waterfall to free cash flow for each archetype, name where the money leaks (COGS, TAC, S&M, SBC, tax, working capital, capex, minorities), and explain why FCF conversion differs so widely across models.
- Keep GMV, gross bookings, and systemwide sales strictly separate from net revenue: apply the principal-vs-agent control test (Ind AS 115 / IFRS 15 / ASC 606), compute take rates on a consistent base, and refuse cross-model revenue comparisons until both are restated on the same basis.
- Compute and interpret operating leverage: contribution margin, degree of operating leverage
DOL = Contribution / EBIT, breakeven revenue, margin of safety. Push the same revenue shock through a high-fixed-cost and a low-fixed-cost structure, in both directions. - Grade revenue quality on the recurring ↔ one-off ladder, find the evidence in filings (contract liabilities/deferred revenue, RPO, order books, renewal and repeat rates), and refuse to capitalize windfall earnings at recurring-revenue multiples.
- Read customer-concentration disclosures (the ≥10% single-customer rule under ASC 280 / Ind AS 108 / IFRS 8, risk factors, receivables notes) and translate concentration into consequences for pricing power, margins, terms of trade, and cliff risk.
- Find the real profit engine: build the revenue-share vs profit-share table from any segment note, identify which line actually deserves the valuation, and verify a claimed flywheel / scale-economies-shared story in the numbers rather than the narrative.
Prerequisites & connections
Builds on. M1.02–M1.06 cover the P&L, revenue recognition (Ind AS 115/ASC 606's five steps, taught there for recording, reused here for classifying), and the segment note you learned to find in M1.10. M2.01–M2.02 gave you margin structure and the DuPont identity; what follows explains why margins and turns trade off across models (the grocer-vs-software question DuPont raised but could not answer). M2.03 set ROIC/ROCE as the master test. Every archetype here gets judged by the return-on-capital shape it produces, against this program's illustrative hurdles (~12% INR for India, ~8–9% USD for the US, as of mid-2026, verify against your M3.03 builds). M2.04's CFO/EBITDA and FCF/PAT cash-conversion checks, plus the maintenance-vs-growth capex split, are consumed here whole. M2.05 supplies the cash conversion cycle, where negative working capital returns as a design feature of certain models. Then M3.04–M3.07 and the value drivers: growth is worth nothing without a spread, so a business model is ultimately a machine for producing (or failing to produce) a durable ROIC−WACC spread; the reverse-DCF habit (M3.05) reappears as "what is the market assuming this model can do?"
Feeds forward. M4.02 takes today's contribution-margin preview and makes it rigorous (unit economics, CAC/LTV, cohorts, payback). M4.03 zooms out from the company's own chain to the industry's chain and profit pool. M4.04–M4.05 ask what defends the economics: you cannot judge a moat until you can state precisely what it protects. Phase 5 industrializes all of it: seventeen sector playbooks, each a named archetype plus sector physics and KPIs. Phase 8's teardown questions 1–3 (what it does & the real profit engine · who the customers are, concentration, recurring? · how ₹1 flows to FCF) are these skills under a stopwatch. Competency C3 in the master map ("understand a business model cold") is certified on the skills built here.
The one-sentence version of this module. Revenue lines are not equal. Each of the six ways of charging for value carries its own gross-margin shape, marginal cost, capital hunger, cash timing, and failure mode, so the analyst's first job is to name the machine, walk one rupee through it to free cash flow, and find the engine room, which is frequently not the biggest room on the ship.