Introduction to Business Flashcards
7 cards from real TMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Introduction to Business flashcards as text
Which of the following best describes a 'prepackaged bankruptcy'?
Answer: A restructuring where creditors agree to the reorganization plan before filing for Chapter 11
In a prepackaged bankruptcy, the company negotiates its reorganization plan with key creditors before filing, reducing the time and cost of the court process.
What is the primary risk of 'concentration risk' in a company's customer base?
Answer: Over-reliance on a few customers so that losing one causes severe revenue decline
Customer concentration risk means that the loss of one or a few major clients can disproportionately damage revenue and viability.
In business turnarounds, 'headcount reduction' is typically used as:
Answer: A tactical cost-reduction lever, often combined with operational redesign
Workforce reductions are a common cost lever in turnarounds but should be paired with process and structural changes to avoid recurring distress.
Which metric measures how efficiently a company uses its assets to generate revenue?
Answer: Asset turnover ratio
Asset turnover ratio (revenue divided by total assets) measures how effectively a company deploys its asset base to generate sales.
A turnaround plan that focuses on divesting non-core business units is primarily aimed at:
Answer: Raising cash and focusing management attention on the most viable operations
Divesting non-core units generates cash liquidity and allows management to concentrate resources on the businesses most likely to recover.
What is a 'forbearance agreement' in the context of distressed lending?
Answer: A lender's temporary agreement not to enforce default remedies while the borrower restructures
A forbearance agreement gives the distressed borrower a limited window of time to fix its problems without the lender immediately accelerating the debt.
Which of the following is the most accurate definition of 'insolvency'?
Answer: A company's inability to pay its debts as they come due
Insolvency occurs when a company cannot meet its financial obligations as they become due, regardless of its asset values on paper.
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