100+ Free CIRA Practice Questions

Explanation: The classic turnaround sequence begins with crisis stabilization—stopping the cash bleed and securing short-term liquidity—before management evaluation, strategy redesign, implementation, and eventual return to growth. Without stabilizing liquidity first, a company may not survive long enough to execute a strategic turnaround.

Explanation: The 13-week cash flow model is the workhorse of distressed liquidity management, projecting weekly receipts and disbursements so management can identify funding gaps, manage vendor payments, and set DIP financing needs. It is a forecasting and monitoring tool, not a valuation or distribution mechanism.

Explanation: Research on business failure consistently identifies management deficiencies—poor strategy, weak financial controls, over-expansion, or failure to adapt—as the leading root cause of corporate decline. External shocks often expose, but rarely solely cause, the failure.

Explanation: A CRO is a senior executive—often an interim or specialist hire—who leads the restructuring effort, manages liquidity and stakeholder negotiations, and lends credibility to creditors, while operating management continues to run the business. The role is operational and strategic, not legal, regulatory, or audit-based.

Explanation: Out-of-court workouts are generally faster, cheaper, more confidential, and less disruptive to customer and supplier relationships than a Chapter 11 case. However, they require consensual agreement because they lack the Code's coercive tools.

Explanation: In a prepackaged bankruptcy, the debtor negotiates a plan and solicits the requisite votes from impaired classes before filing, allowing for a very fast confirmation—often within weeks. It still requires a disclosure statement and court confirmation.

Explanation: A business should be preserved as a going concern when its reorganization (going-concern) value exceeds what creditors would realize in a liquidation. If liquidation value is higher, dismantling the business maximizes recoveries.

Explanation: The net weekly cash burn is $475,000 − $400,000 = $75,000. Dividing the $150,000 balance by the $75,000 weekly burn yields 2 weeks of runway. This kind of runway calculation drives urgency in turnaround planning.

Explanation: Turnarounds frequently rely first on internally generated liquidity—accelerating receivables collection, reducing inventory, deferring capital spending, and selling non-core assets—before seeking external capital. This preserves flexibility and reduces dependence on lenders.

Explanation: A sub rosa plan is a transaction—often a 363 sale—that effectively determines distributions and restructures the estate while bypassing the disclosure, voting, and absolute-priority protections of plan confirmation. Courts scrutinize and may reject such transactions as improper short-circuits of the plan process.