Working Capital Changes in Distress

This question practices your understanding of how financial strain shows up in operating accounts, especially the relationship between liquidity pressure and working capital. In a restructuring interview, bankers want to see that you can explain why customer prepayments, supplier payment behavior, and collection patterns may all change when a business is under stress, and how those changes affect cash flow and borrowing capacity. It also tests whether you can connect the accounting mechanics to the practical incentives of customers, suppliers, and lenders when a company starts to weaken.