CIRA Cash Flow Management & Liquidity Analysis 2

Question 1

Which metric best measures a company's ability to meet short-term obligations without selling inventory?

Accepted Answer

Quick ratio

Answer

Current ratio

Answer

Debt-to-equity ratio

Answer

Operating cash flow ratio

Question 2

A company's days sales outstanding (DSO) increased from 30 to 60 days during a distress period. What is the most likely cash flow implication?

Accepted Answer

Delayed cash collections reducing available liquidity

Answer

Improved cash conversion efficiency

Answer

Increased revenue recognition accelerating cash inflows

Answer

Reduced accounts payable obligations

Question 3

What is 'adequate protection' in the context of a secured creditor's cash collateral rights in Chapter 11?

Accepted Answer

Compensation or security provided to prevent diminution of a secured creditor's interest

Answer

A guaranty provided by the debtor's parent company

Answer

A court order prohibiting the sale of collateral

Answer

Additional equity contributed by existing shareholders

Question 4

In a restructuring context, 'operational cash burn' is best defined as:

Accepted Answer

Cash consumed by day-to-day operations excluding restructuring costs

Answer

Net income minus depreciation and amortization

Answer

Total debt service payments in a given period

Answer

Capital expenditures required to maintain operations

Question 5

Which of the following actions would MOST directly improve a distressed company's short-term liquidity?

Accepted Answer

Negotiating extended payment terms with key suppliers

Answer

Accelerating depreciation on fixed assets

Answer

Increasing goodwill on the balance sheet

Answer

Issuing additional common stock

Question 6

When evaluating a distressed company's liquidity, a restructuring advisor would be most concerned about which combination of conditions?

Accepted Answer

High DSO and low days payable outstanding (DPO)

Answer

High DSO and high days payable outstanding (DPO)

Answer

Low DSO and high inventory turnover

Answer

Low inventory and high current ratio

Question 7

What is a 'carve-out' in the context of DIP financing?

Accepted Answer

A specified amount of DIP collateral reserved for professional fees and unsecured creditor committee expenses

Answer

An exemption from the automatic stay for secured creditors

Answer

The portion of assets excluded from the DIP lender's lien

Answer

A mechanism to split the estate into separate operating units