CTP Cash Flow Management & Liquidity Flashcards

Which tool is most commonly used in turnaround situations to project short-term cash needs and identify liquidity gaps?

Answer: 13-week cash flow forecast

The 13-week cash flow forecast is the standard tool in distressed situations to track near-term liquidity on a rolling weekly basis.

A company's Days Sales Outstanding (DSO) has increased from 35 to 62 days. What is the primary cash impact?

Answer: Cash is tied up longer in receivables, reducing available liquidity

Rising DSO means the company waits longer to collect cash from customers, directly tightening available working capital.

In a distressed company, which working capital lever typically yields the fastest cash improvement?

Answer: Accelerating accounts receivable collections

Accelerating collections reduces the receivables balance quickly, converting existing sales into usable cash without requiring new revenue.

What does a negative cash conversion cycle indicate for a distressed business?

Answer: The company collects cash from customers before paying suppliers, a favorable liquidity position

A negative cash conversion cycle means the company funds operations with supplier credit rather than its own cash, which is a liquidity advantage.

Which action is a CTP practitioner most likely to recommend to immediately preserve cash during a liquidity crisis?

Answer: Implementing a payment moratorium on non-critical vendor invoices

Temporarily deferring non-critical vendor payments conserves cash and buys time for the restructuring professional to develop a longer-term plan.

What is a 'cash trap' in the context of a distressed business?

Answer: A subsidiary or division that consumes cash without generating returns that justify the investment

A cash trap is a business unit that drains liquidity from the parent company without producing adequate returns, and is a common divestiture candidate in turnarounds.