Business Advisory & Consulting Flashcards
7 cards from real ABA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business Advisory & Consulting flashcards as text
A client's operating leverage is high. What does this indicate about their cost structure and risk profile?
Answer: High fixed costs relative to variable costs, amplifying profit swings with revenue changes
High operating leverage means fixed costs dominate the cost structure, so small revenue changes produce large swings in operating income—amplifying both upside and downside risk.
When advising a client on a build-versus-buy technology decision, which factor most strongly favors a build (custom development) approach?
Answer: The capability is a core differentiator that off-the-shelf solutions cannot adequately replicate
Custom development is justified when the technology delivers unique competitive advantage that packaged solutions cannot provide, outweighing the higher cost and implementation risk.
A consultant is using Lewin's Change Management model. Which phase involves 'refreezing,' and what does it accomplish?
Answer: The third phase, which reinforces and institutionalizes the new state to prevent regression
Refreezing is Lewin's final phase, embedding the new behaviors into culture, processes, and systems so the organization doesn't revert to old habits.
A client's current ratio is 0.85 and quick ratio is 0.72. What is the most appropriate advisory interpretation?
Answer: The company may face short-term liquidity stress and relies on inventory conversion to meet obligations
Both ratios below 1.0 indicate current liabilities exceed the most liquid assets, signaling potential difficulty meeting short-term obligations without additional financing or asset conversion.
A business advisor recommends a client implement an economic value added (EVA) metric. What is the primary management benefit of EVA over traditional net income?
Answer: EVA incorporates the cost of equity capital, revealing whether operations truly create value above all capital costs
Unlike net income, EVA deducts a charge for equity capital, so a positive EVA confirms that returns exceed all capital costs—making it a purer measure of value creation.
When preparing a strategic advisory report, the executive summary should be written:
Answer: Last, after the full analysis is complete, so it accurately reflects the conclusions reached
The executive summary should be written last so it accurately distills the final conclusions, recommendations, and key findings from the completed analysis.
A client pursuing a market penetration strategy asks how to measure success. Which KPI is most directly aligned with this strategy?
Answer: Market share gain within the existing served market
Market penetration specifically targets increasing share of an existing market with existing products, so market share gain is the most direct measure of strategic success.