CTP Cash Flow Management & Liquidity Solutions Flashcards

Which metric is most commonly used by turnaround professionals to assess near-term cash sufficiency?

Answer: Days cash on hand

Days cash on hand measures how many days a company can cover its operating expenses with its current cash balance, making it a critical short-term liquidity metric.

A sale-leaseback transaction in a turnaround context primarily serves to:

Answer: Monetize owned assets while retaining operational use

A sale-leaseback allows a distressed company to sell owned assets for immediate cash while leasing them back to continue uninterrupted operations.

'Available liquidity' in a distressed company's financial analysis refers to:

Answer: Cash plus undrawn revolving credit availability

Available liquidity encompasses both cash on hand and any undrawn capacity under revolving credit facilities, representing total near-term funding available.

In a Chapter 11 case, adequate protection payments to secured creditors are intended to:

Answer: Compensate lenders for any diminution in the value of their collateral

Adequate protection payments protect secured creditors against any decline in collateral value while the debtor uses that collateral during bankruptcy proceedings.

What is 'zero-based budgeting' in a turnaround context?

Answer: Building a budget from scratch with every expense requiring justification

Zero-based budgeting requires every expense to be justified from zero each period rather than incrementally adjusting prior budgets, ensuring only essential costs are approved.

Which of the following best describes 'negative cash flow from operations' in a distressed company?

Answer: The company is spending more cash on operations than it receives

Negative operating cash flow means a company is consuming more cash in running its business than it generates, which is unsustainable without external funding.