TMA Crisis Management 2

Question 1

What is an 'automatic stay' in Chapter 11 bankruptcy?

Accepted Answer

A court-imposed halt on most collection actions and legal proceedings against the debtor

Answer

The automatic stay is a court order that immediately halts most creditor actions against the debtor — including lawsuits, foreclosures, and collection calls — upon a Chapter 11 filing.

Question 2

What is 'employee retention' a key concern during a turnaround?

Accepted Answer

Key talent leaving can destroy the operational capability needed to execute the turnaround

Answer

Losing key employees during a crisis degrades the operational expertise and institutional knowledge the company needs to execute its turnaround, making the situation worse.

Question 3

What is a 'key employee retention plan' (KERP) designed to do?

Accepted Answer

Provide financial incentives for critical employees to stay through the restructuring process

Answer

A KERP offers retention bonuses or other incentives to key employees to prevent them from leaving during the uncertainty of a restructuring, preserving operational capacity.

Question 4

What is a 'bridge loan' in the context of corporate distress?

Accepted Answer

Short-term emergency financing to keep a company operational while a longer-term solution is arranged

Answer

A bridge loan provides immediate liquidity to a distressed company to cover near-term cash needs while a more comprehensive financing or restructuring solution is being arranged.

Question 5

Why is speed critical in a turnaround engagement?

Accepted Answer

Every day of distress consumes cash, erodes stakeholder confidence, and narrows the range of viable options

Answer

In a distressed situation, delay is catastrophic — cash burns down, creditors lose patience, employees leave, and customers defect, each reducing the probability of a successful turnaround.

TMA - Turnaround Management Association Practice Test

TMA - Turnaround Management Association Practice Test

TMA Crisis Management 2