TMA Introduction to Business 5

Question 1

Which of the following best describes a 'prepackaged bankruptcy'?

Accepted Answer

A restructuring where creditors agree to the reorganization plan before filing for Chapter 11

Answer

In a prepackaged bankruptcy, the company negotiates its reorganization plan with key creditors before filing, reducing the time and cost of the court process.

Question 2

What is the primary risk of 'concentration risk' in a company's customer base?

Accepted Answer

Over-reliance on a few customers so that losing one causes severe revenue decline

Answer

Customer concentration risk means that the loss of one or a few major clients can disproportionately damage revenue and viability.

Question 3

In business turnarounds, 'headcount reduction' is typically used as:

Accepted Answer

A tactical cost-reduction lever, often combined with operational redesign

Answer

Workforce reductions are a common cost lever in turnarounds but should be paired with process and structural changes to avoid recurring distress.

Question 4

Which metric measures how efficiently a company uses its assets to generate revenue?

Accepted Answer

Asset turnover ratio

Answer

Asset turnover ratio (revenue divided by total assets) measures how effectively a company deploys its asset base to generate sales.

Question 5

A turnaround plan that focuses on divesting non-core business units is primarily aimed at:

Accepted Answer

Raising cash and focusing management attention on the most viable operations

Answer

Divesting non-core units generates cash liquidity and allows management to concentrate resources on the businesses most likely to recover.

TMA - Turnaround Management Association Practice Test

TMA - Turnaround Management Association Practice Test

TMA Introduction to Business 5