CIRA CIRA Valuation Methods & Asset Assessment

Question 1

Which valuation approach estimates a company's value based on the present value of its projected future cash flows?

Accepted Answer

Discounted Cash Flow (DCF)

Answer

Liquidation Value

Answer

Book Value

Answer

Comparable Company Analysis

Question 2

In a distressed valuation context, the 'orderly liquidation value' (OLV) typically differs from 'forced liquidation value' (FLV) because:

Accepted Answer

OLV allows adequate time to market and sell assets, yielding higher proceeds

Answer

OLV assumes assets are sold immediately under duress

Answer

FLV is always higher than OLV

Answer

OLV excludes intangible assets from the analysis

Question 3

When applying the market approach to valuing a distressed company, a CIRA professional would most likely use:

Accepted Answer

Comparable company multiples adjusted for distress discount

Answer

The company's historical cost basis

Answer

Only publicly traded stock prices

Answer

Net asset value from the balance sheet

Question 4

Which of the following best describes 'enterprise value' (EV) in a restructuring analysis?

Accepted Answer

Total value of the business to all capital providers, including debt and equity

Answer

The market capitalization of common equity only

Answer

The book value of total assets minus current liabilities

Answer

The liquidation value of tangible assets

Question 5

A CIRA is assessing a distressed manufacturer. Which factor would most significantly reduce the going-concern value relative to liquidation value?

Accepted Answer

Severe and sustained operating losses with no viable turnaround plan

Answer

Temporary supply chain disruptions

Answer

A single large customer representing 30% of revenue

Answer

Pending minor litigation below $500,000

Question 6

Under the 'absolute priority rule,' which claim is paid first in a Chapter 7 liquidation?

Accepted Answer

Secured creditors to the extent of their collateral value

Answer

Unsecured creditors

Answer

Equity holders

Answer

Junior subordinated debt