TMA Crisis Management

Question 1

What is the first step a turnaround professional should take when engaged with a deeply distressed company?

Accepted Answer

Conduct a rapid diagnostic to assess the severity of the crisis and available options

Answer

A rapid diagnostic — assessing cash position, debt obligations, operational performance, and stakeholder dynamics — must precede any action so the practitioner understands the true situation.

Question 2

What is a 'liquidity crisis' in the context of corporate distress?

Accepted Answer

A situation where a company cannot meet its short-term cash obligations as they come due

Answer

A liquidity crisis occurs when a company lacks sufficient cash or access to credit to pay its immediate obligations, regardless of its longer-term asset value.

Question 3

Which of the following best describes 'stakeholder communication' in a crisis?

Accepted Answer

Proactively managing the message to key constituencies to maintain confidence and cooperation

Answer

Proactive stakeholder communication during a crisis — with employees, customers, lenders, and suppliers — helps maintain trust and prevent panic that could accelerate the company's decline.

Question 4

What is a 'going concern' opinion from an auditor?

Accepted Answer

An auditor's warning that substantial doubt exists about the company's ability to continue operating

Answer

A going concern opinion is issued by auditors when they have substantial doubt about a company's ability to continue operating for the next 12 months without corrective action.

Question 5

In crisis management, what does 'triage' refer to?

Accepted Answer

Prioritizing the most urgent issues that need immediate attention to prevent collapse

Answer

Triage in turnaround management means rapidly identifying and prioritizing the most critical problems — particularly cash-related — that must be addressed immediately to prevent further deterioration.

TMA - Turnaround Management Association Practice Test

TMA - Turnaround Management Association Practice Test

TMA Crisis Management