CIRA Financial Analysis & Reporting 3

Question 1

A 13-week cash flow forecast is primarily used in insolvency proceedings to:

Accepted Answer

Monitor short-term liquidity and covenant compliance under DIP financing

Answer

The 13-week cash flow forecast tracks near-term cash receipts and disbursements to ensure the DIP borrower maintains adequate liquidity and meets lender covenants.

Question 2

Which of the following is NOT typically included as a reorganization item under ASC 852?

Accepted Answer

Depreciation on property, plant & equipment

Answer

Depreciation on PP&E is an ordinary operating expense, not a reorganization item; ASC 852 reorganization items include professional fees, debt discharge gains, and interest on cash accumulations.

Question 3

When a creditor holds both secured and unsecured claims against a debtor, the unsecured deficiency claim arises when:

Accepted Answer

The claim balance exceeds the collateral's fair value

Answer

An unsecured deficiency claim equals the amount by which a creditor's total claim exceeds the fair value of its collateral.

Question 4

Which approach to valuing a distressed business is most appropriate when the company will be sold as a going concern?

Accepted Answer

Enterprise value based on discounted cash flows or comparable transactions

Answer

A going-concern sale assumes the business continues to operate, making DCF or comparable transaction multiples the most appropriate valuation approaches.

Question 5

In a waterfall analysis, which class of claims is typically paid first?

Accepted Answer

Administrative expense claims

Answer

Administrative expense claims, including post-petition obligations and DIP financing, have priority over all pre-petition claims and are paid first in the waterfall.

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

CIRA Financial Analysis & Reporting 3