TMA Cash Flow Management

Question 1

What is the primary purpose of a 13-week cash flow forecast in a turnaround situation?

Accepted Answer

To provide a near-term, rolling view of liquidity and cash needs

Answer

To project annual earnings before interest and taxes

Answer

To estimate the company's long-term enterprise value

Answer

To calculate the company's debt-to-equity ratio

Question 2

Which type of lending arrangement is most commonly used to provide liquidity to distressed companies based on the value of their receivables and inventory?

Accepted Answer

Asset-based lending (ABL)

Answer

Mezzanine financing

Answer

Term loan B

Answer

Convertible note financing

Question 3

What does 'cash burn rate' measure in a distressed company context?

Accepted Answer

The net amount of cash the company consumes per period when operating at a loss

Answer

The rate at which the company depreciates fixed assets

Answer

The speed at which the company collects outstanding receivables

Answer

The pace at which inventory is converted to revenue

Question 4

In a turnaround, which forecasting method builds cash flow projections from individual receipts and disbursements rather than from income statement projections?

Accepted Answer

Direct method forecasting

Answer

Indirect method forecasting

Answer

Regression-based forecasting

Answer

Top-down forecasting

Question 5

What is a 'borrowing base' in the context of asset-based lending?

Accepted Answer

The formula-driven calculation of eligible collateral that determines the maximum available credit

Answer

The total outstanding debt on a company's balance sheet

Answer

The maximum credit limit established by the lender regardless of asset values

Answer

The base interest rate applied to the loan before spread is added

Question 6

What does 'DIP financing' stand for and why is it critical in a Chapter 11 restructuring?

Accepted Answer

Debtor-in-Possession financing; it provides liquidity to operate the business during the bankruptcy process

Answer

Debt-in-Place financing; it preserves existing debt covenants during bankruptcy

Answer

Default-Interest-Premium financing; it compensates lenders for increased credit risk

Answer

Distressed Investment Placement financing; it attracts new equity investors

Question 7

Which of the following actions is typically prioritized first when a turnaround advisor identifies a severe cash crisis?

Accepted Answer

Implementing a cash conservation plan and identifying immediate liquidity levers

Answer

Filing for Chapter 11 bankruptcy protection immediately

Answer

Issuing new equity to dilute existing shareholders

Answer

Renegotiating all long-term supply contracts