Due Diligence & Valuation Flashcards
6 cards from real CTP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Due Diligence & Valuation flashcards as text
What is the primary purpose of due diligence in turnaround situations?
Answer: To thoroughly assess the company's financial condition, operations, and viability
Due diligence in turnaround situations provides a thorough assessment of the company's financial health, operations, assets, liabilities, and prospects for recovery.
Which valuation method considers a company's expected future cash flows?
Answer: Discounted Cash Flow (DCF) analysis
DCF analysis estimates the present value of a company based on projected future cash flows, discounted at an appropriate rate to reflect risk and time value of money.
What is a 13-week cash flow forecast used for?
Answer: To predict short-term cash needs and identify potential liquidity crises
A 13-week cash flow forecast provides detailed short-term visibility into cash receipts and disbursements, critical for managing liquidity in distressed situations.
What is enterprise value in the context of company valuation?
Answer: The total value of a company including debt and equity minus cash
Enterprise value represents the total value of a company, calculated as market capitalization plus total debt minus cash and cash equivalents.
Why is accounts receivable analysis important in turnaround due diligence?
Answer: To assess the collectibility of outstanding receivables and true cash conversion
Analyzing accounts receivable reveals the quality and collectibility of outstanding amounts, helping determine actual cash flow potential and identify potential write-offs.
What does 'going concern value' mean?
Answer: The value of a business assuming it will continue operating
Going concern value represents the worth of a business under the assumption that it will continue operating into the future, typically higher than liquidation value.