CIRA Cash Flow Management & Liquidity Analysis 1

Question 1

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

Accepted Answer

13-week rolling cash flow forecast

Answer

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.

Question 2

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

Accepted Answer

Post-petition financing that typically receives super-priority status

Answer

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.

Question 3

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

Accepted Answer

Vendor payments for critical goods

Answer

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

Question 4

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

Accepted Answer

4 weeks

Answer

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

Question 5

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

Accepted Answer

Equity distribution to shareholders

Answer

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

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

CIRA Cash Flow Management & Liquidity Analysis 1