TMA Operational Turnaround 1 — Questions and Answers
Question 1: What is the first priority in an operational turnaround engagement?
- Launching new products
- Stabilizing cash flow and stopping the bleeding (Correct answer)
- Replacing all senior management
- Refinancing all existing debt
Correct answer: Stabilizing cash flow and stopping the bleeding
The immediate priority in any operational turnaround is to stabilize cash flow by identifying and stopping cash drains before implementing longer-term improvements.
Question 2: Which of the following is a common quick-win operational cost reduction in a turnaround?
- Building a new headquarters
- Reducing discretionary spending and eliminating non-core activities (Correct answer)
- Expanding the sales force immediately
- Increasing R&D investment
Correct answer: Reducing discretionary spending and eliminating non-core activities
Eliminating discretionary spending and non-core activities delivers fast cash preservation with minimal disruption to core revenue-generating operations.
Question 3: What does SKU rationalization mean in an operational turnaround?
- Renaming product lines
- Reducing the number of products offered to focus on the most profitable ones (Correct answer)
- Adding new product variants to boost revenue
- Outsourcing manufacturing overseas
Correct answer: Reducing the number of products offered to focus on the most profitable ones
SKU rationalization involves eliminating unprofitable or slow-moving products to simplify operations, reduce inventory, and focus resources on the highest-margin offerings.
Question 4: What is a key performance indicator (KPI) dashboard used for in a turnaround?
- Replacing financial audits
- Providing management real-time visibility into critical operational and financial metrics (Correct answer)
- Filing reports with the SEC
- Communicating with creditors only
Correct answer: Providing management real-time visibility into critical operational and financial metrics
A KPI dashboard gives turnaround management real-time visibility into critical metrics so they can quickly identify problems and take corrective action.
Question 5: In turnaround management, what does 'rightsizing' the workforce mean?
- Hiring aggressively to support growth
- Reducing headcount to align staffing levels with current business needs (Correct answer)
- Outsourcing all functions
- Promoting internal candidates to fill gaps
Correct answer: Reducing headcount to align staffing levels with current business needs
Rightsizing aligns the workforce size with the company's actual revenue and operational needs, eliminating excess overhead during a period of financial stress.
Question 6: What is the purpose of a 'working capital optimization' initiative in a turnaround?
- Increase capital expenditure
- Free up cash trapped in receivables, inventory, and payables (Correct answer)
- Issue new equity to fund operations
- Delay supplier payments indefinitely
Correct answer: Free up cash trapped in receivables, inventory, and payables
Working capital optimization releases cash from operational sources — collecting receivables faster, reducing inventory, and extending payables — without requiring external financing.
TMA Operational Turnaround 1
What is the first priority in an operational turnaround engagement?