Certification in Distressed Business Valuation (CDBV) Free Practice Test

Part 1 explains the bankruptcy process and the legal setting for valuation, including claims, collateral, financing, disclosure, and plans. Part 2 develops business valuation methods without assuming distress. Part 3 tests how those methods must be adapted when cash flows may stop, debt trades below face value, or a reorganization changes the capital structure. For example, a conventional enterprise value estimate from Part 2 becomes useful in Part 3 only after its forecast, discount rate, and proposed creditor distributions are made consistent with the restructuring facts.

Enterprise value measures the operating business under a stated premise. A creditor recovery analysis must also account for cash, financing claims, secured interests, higher-priority obligations, transaction or wind-down costs, and the amount and status of allowed claims. In a hypothetical plan, enterprise value of $75 million plus $5 million of available cash, less $10 million of DIP debt, $40 million of secured debt, and $5 million of administrative costs leaves $25 million for junior claims and interests, subject to the plan's legal requirements.

The valuation purpose and supported operating facts govern the premise. A going-concern analysis needs a credible path to continued operations and funding. A liquidation analysis estimates asset realizations, collection timing, wind-down costs, and claim distributions. Both may be needed: a proposed chapter 11 plan can rely on reorganized operating value while a liquidation comparison tests what affected creditors would receive if the business were wound down. The two figures should retain their own assumptions and dates.