ASSESSMENT
Multiple Choice Questions
1. According to the post, during a crisis money:
a) Disappears from the economy b) Changes hands c) Is destroyed by inflation d) Returns to lenders only
2. What determines whether you are a sheep ready for slaughter?
a) The size of your revenue b) Your profit margins c) Whether you have strategies for economic cycles d) Your years in the industry
3. Business cycles are described in the chapter as:
a) Growth, stability, decline, recovery b) Expansion, recession, expansion, repeating c) Boom, bust, stagnation, renewal d) Innovation, maturity, disruption
4. Which of the following did Etta James track as a leading indicator?
a) Quarterly net income b) Regional building permit issuance c) Competitor advertising spend d) National unemployment
5. How much cash did Harbourline Distributors hold when the shock arrived?
a) $110,000 b) $310,000 c) $640,000 d) $1.4 million
6. Harbourline’s largest customer represented what share of revenue?
a) 18 percent b) 29 percent c) 41 percent d) 55 percent
7. Keystone acquired a failed competitor’s inventory and fleet for:
a) $310,000 b) $640,000 c) $1.4 million d) $2.1 million
8. What happened to Keystone’s multiple through the cycle?
a) Contracted from 6.7 to 5.0 times b) Stayed flat at 5.0 times c) Expanded from 5.0 to 6.7 times d) Became irrelevant
9. “Offensive strategy disguised as prudent management” describes:
a) Aggressive acquisition financing b) Systematic risk management that generates value c) Tax minimization d) Aggressive sales compensation
10. The baby boomer wealth transfer is described as lasting approximately:
a) 5 years b) 10 years c) 15 years d) 25 years
Essay Questions
1. Explain what “crises are wealth redistribution events” means. Describe the four specific mechanisms through which value transfers from unprepared to prepared businesses, using the Keystone and Harbourline case for evidence.
2. Compare the amateur and professional responses to recession, employee departure, customer defection, and supplier failure. Explain why the professional response is only possible if work was completed before the event.
3. Explain how pre thought preparedness lowers a business’s risk premium before any crisis actually occurs. Address why a buyer would credit a plan that has never been tested, and where that credit should be limited.
4. Albert King said “you cannot plan for a market, you just work harder than the other guy.” Construct the strongest possible case for his position, then rebut it using evidence from the case study.
5. Define an antifragile enterprise and explain why its valuation multiple can expand during a downturn while the industry’s contracts. Use Keystone’s figures, and identify what a sceptical buyer would demand as proof.
