TMA Introduction to Business 4

Question 1

Which of the following best defines 'gross profit margin'?

Accepted Answer

(Revenue minus cost of goods sold) divided by revenue

Answer

Gross profit margin measures the percentage of revenue remaining after subtracting the direct cost of producing goods or services.

Question 2

A turnaround professional is hired to assess a distressed manufacturer. Their FIRST priority should be:

Accepted Answer

Stabilizing cash flow and securing immediate liquidity

Answer

Stabilizing cash flow is always the first step in a turnaround to stop the bleeding and buy time for deeper restructuring.

Question 3

What is 'accounts receivable days' (DSO) used to measure?

Accepted Answer

The average number of days it takes to collect payment from customers

Answer

Days Sales Outstanding (DSO) measures the efficiency of a company's credit and collection process.

Question 4

Which business theory suggests that a company should focus on its core competencies and outsource non-essential activities?

Accepted Answer

Core Competency Theory (Prahalad & Hamel)

Answer

Prahalad and Hamel's Core Competency Theory argues companies should build advantage around distinctive internal capabilities and outsource the rest.

Question 5

In a Chapter 11 bankruptcy, a 'DIP loan' refers to:

Accepted Answer

Debtor-in-Possession financing that funds operations during the reorganization

Answer

DIP (Debtor-in-Possession) financing gives bankrupt companies access to new capital during reorganization, typically with super-priority lien status.

TMA - Turnaround Management Association Practice Test