Cash Flow Management & Liquidity Analysis Flashcards

In a distressed company, which cash flow statement format is most useful for short-term liquidity monitoring during a restructuring?

Answer: 13-week rolling cash flow forecast

A 13-week rolling cash flow forecast provides near-term visibility into weekly receipts and disbursements, which is essential for managing liquidity in a distressed situation.

Which of the following best describes 'Debtor-in-Possession' (DIP) financing?

Answer: Post-petition financing that typically receives super-priority status

DIP financing is new credit extended to a debtor after a Chapter 11 filing and typically receives super-priority administrative expense status under the Bankruptcy Code.

When preparing a 13-week cash flow forecast, which item is typically classified as a disbursement rather than a receipt?

Answer: Vendor payments for critical goods

Vendor payments for critical goods represent cash going out of the business and are therefore classified as disbursements in the cash flow forecast.

A distressed company has $2M in available cash, $500K in weekly operating disbursements, and no additional liquidity sources. What is its approximate liquidity runway?

Answer: 4 weeks

$2M divided by $500K per week equals 4 weeks of liquidity runway before cash is exhausted.

Which of the following is NOT typically included in a 'minimum cash balance' requirement in a DIP credit agreement?

Answer: Equity distribution to shareholders

Equity distributions to shareholders are restricted during bankruptcy proceedings and would not be part of a minimum cash balance requirement in a DIP facility.

What is 'cash collateral' in the context of a Chapter 11 case?

Answer: Cash or cash equivalents subject to a secured creditor's lien

Cash collateral refers to cash or cash equivalents in which a secured creditor holds an interest, and the debtor must obtain consent or court approval to use it.

In a cash flow waterfall analysis for a distressed company, which payment category is typically funded last?

Answer: Equity distributions

Equity distributions sit at the bottom of the payment waterfall and are funded last, after all creditor and administrative claims are satisfied, consistent with the absolute priority rule.