CIRA Principles & Practices

Question 1

What is insolvency?

Accepted Answer

Liabilities exceed assets or unable to pay debts

Answer

Excess cash flow

Answer

High profits

Answer

Strong liquidity

Question 2

What is the purpose of restructuring in financial distress?

Accepted Answer

Reorganize debts and operations

Answer

Increase debt

Answer

Ignore creditors

Answer

Liquidate assets immediately

Question 3

Which law governs bankruptcy proceedings in the U.S.?

Accepted Answer

U.S. Bankruptcy Code

Answer

Securities Act

Answer

Sarbanes-Oxley Act

Answer

Dodd-Frank Act

Question 4

What role does a Certified Insolvency & Restructuring Advisor play?

Accepted Answer

Advisor for distress and restructuring

Answer

Financial auditor only

Answer

Sales representative

Answer

Marketing specialist

Question 5

What is a key benefit of restructuring debt?

Accepted Answer

Improves cash flow and extends terms

Answer

Increases interest rates

Answer

Shortens payment period

Answer

Reduces creditworthiness

Question 6

What is liquidation?

Accepted Answer

Selling assets to pay debts

Answer

Buying new assets

Answer

Increasing liabilities

Answer

Ignoring debts

Question 7

Which financial statement is crucial for insolvency analysis?

Accepted Answer

Balance sheet

Answer

Income statement

Answer

Cash flow statement

Answer

Statement of changes in equity

Question 8

What is the difference between Chapter 7 and Chapter 11 bankruptcy?

Accepted Answer

Chapter 7 liquidates; Chapter 11 reorganizes

Answer

Chapter 7 reorganizes debts

Answer

Both liquidate assets

Answer

Both reorganize debts

Question 9

Why is cash flow analysis important in restructuring?

Accepted Answer

Assess ability to pay debts

Answer

Ignore payments

Answer

Increase liabilities

Answer

Delay decisions