CIRA Financial Analysis & Reporting 2

Question 1

Under ASC 852, which of the following must be segregated on the balance sheet of a debtor-in-possession?

Accepted Answer

Pre-petition liabilities subject to compromise

Answer

ASC 852 requires pre-petition liabilities subject to compromise to be segregated from ordinary liabilities on the DIP balance sheet.

Question 2

Which financial metric best measures a distressed company's ability to service its debt from operations?

Accepted Answer

EBITDA-to-interest coverage ratio

Answer

The EBITDA-to-interest coverage ratio directly compares operating cash generation to interest obligations, making it the most relevant debt service metric.

Question 3

When preparing a Statement of Affairs, assets are valued at:

Accepted Answer

Fair value or estimated net realizable value

Answer

A Statement of Affairs presents assets at their estimated net realizable or liquidation value rather than historical cost.

Question 4

A company's trailing twelve-month (TTM) EBITDA is best calculated using which approach?

Accepted Answer

Last fiscal year plus YTD current period minus YTD prior period

Answer

TTM EBITDA is computed as prior full-year EBITDA plus current YTD minus the comparable prior-year YTD period to capture the most recent 12 months.

Question 5

Which ratio is most commonly used to assess working capital adequacy in a distressed company?

Accepted Answer

Current ratio

Answer

The current ratio (current assets divided by current liabilities) directly measures short-term liquidity and working capital adequacy.

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

CIRA Financial Analysis & Reporting 2