cash runway
the amount of time a company can keep operating before it runs out of cash at its current spending rate
Example: With a 9.5-month cash runway, they decided to slow spending and improve collections.
Advanced listeningDownturn risk managementDuration 00:04:06
English Listening Practice (Advanced) - Boardroom Risk Review in a Downturn
In this conversation, Finance Director Maya Chen updates Board Chair Robert Hale after a 7:30 a.m. risk committee call. They discuss falling demand in Q2, a revised revenue forecast of $128 million, and the company’s cash runway of about 9.5 months. Maya proposes tightening credit terms, pausing a planned warehouse lease in Newark, and building a more conservative plan for the June 18 board meeting. Robert challenges her on customer concentration risk, covenant headroom, and how to communicate changes to staff and lenders. Listen for specific numbers, dates, and the trade-offs between protecting liquidity and keeping growth options open.
Topic focus: A finance director briefs the board chair on the company’s risk position and proposes actions for the next quarter during an economic downturn.
Audio
1) Listen once for the main idea. 2) Answer questions. 3) Study the transcript.
Questions
Answer each question based on the audio. Use Practice Mode to test yourself without the transcript.
0 of 10 answered0%
Transcript
Study Mode shows the full transcript. Practice Mode hides it.
Tap a timestamp to jump to that point in the audio
Transcript hidden. Switch to Study Mode when you want to check details.
SPEAKER A
Robert, thanks for making time. After the 7:30 risk committee call, I wanted to align before the June 18 board meeting.
SPEAKER B
Of course, Maya. The macro picture keeps deteriorating. Give me the headline risks, not the spreadsheet.
SPEAKER A
Headline: demand is down 11% quarter-on-quarter in Q2, and our revised revenue forecast is $128 million, down from $142. The immediate issue is liquidity. At the current burn, we have a cash runway of about 9.5 months.
SPEAKER B
That’s tighter than I expected. What’s driving the burn? Inventory? Payroll?
SPEAKER A
Both, but primarily working capital. Two large customers are paying late, so our cash conversion cycle has stretched from 46 days to 61. That’s why I’m recommending we tighten credit terms for new orders and pull forward collections.
SPEAKER B
Tightening terms can spook customers. Are we sure we’re not overreacting?
SPEAKER A
I don’t think so. We ran stress testing with three scenarios: base, downside, and severe. In the severe case, if gross margin drops 2 points and receivables slip another 10 days, we breach our leverage covenant in November.
SPEAKER B
How much covenant headroom do we have today?
SPEAKER A
About 18% on leverage and 22% on interest coverage. It sounds comfortable, but it evaporates quickly if EBITDA softens.
SPEAKER B
Understood. What are you proposing besides collections?
SPEAKER A
First, pause the Newark warehouse lease. The landlord wants us to sign by May 30, but it’s discretionary capex in disguise. Second, reduce procurement on slow-moving SKUs by 15% to avoid a write-down. Third, set a risk appetite statement for the next two quarters: protect liquidity, accept slower growth.
SPEAKER B
That last part is political. People hear “slower growth” and assume layoffs.
SPEAKER A
We can avoid that if we act early. I’m proposing a hiring freeze outside customer support and cybersecurity. It’s a measured step, not a panic move.
SPEAKER B
What about customer concentration risk? You mentioned two large customers paying late.
SPEAKER A
Yes. Atlas Retail is 14% of revenue and Northbay Logistics is 9%. If either delays again, it hits us. I want to diversify by pushing mid-market accounts, even if the sales cycle is longer.
SPEAKER B
Longer sales cycles during a downturn can be a trap. How do we keep optionality?
SPEAKER A
By keeping the revolving credit facility undrawn and maintaining lender confidence. I’ve scheduled a call with Harbor Bank on May 27 to walk them through our mitigation plan and show we’re not hiding the ball.
SPEAKER B
Good. But I also want a plan for communications internally. The rumor mill is brutal.
SPEAKER A
Agreed. After the lender call, we can brief managers with a simple message: we’re prioritizing resilience, not retreat. We’ll share the key metrics—cash runway, collections targets, and the timeline for revisiting the lease.
SPEAKER B
If the board asks for cuts, where do we draw the line?
SPEAKER A
We should ring-fence product security and regulatory work. Cutting there creates tail risk. For everything else, we can phase spending: immediate pause on nonessential travel, then renegotiate vendor contracts in June.
SPEAKER B
And if the severe scenario starts to look like reality?
SPEAKER A
Then we trigger the contingency plan: reduce operating expenses by 8% and accelerate price increases on premium tiers. It’s not pleasant, but it keeps us inside covenants.
SPEAKER B
All right. Bring me a one-page summary with the scenarios, the covenant headroom, and your recommended risk appetite statement by Friday at 4 p.m.
SPEAKER A
Will do. I’ll also include the Newark lease decision and the May 27 lender call agenda.
SPEAKER B
Thanks, Maya. This is the kind of clarity we need when the economy turns.
Vocabulary
Key terms from this listening practice with meanings and examples.
working capital
money tied up in short-term assets and liabilities like inventory, receivables, and payables
Example: Late customer payments increased working capital needs and pressured cash.
cash conversion cycle
the time it takes to turn inventory and receivables into cash, measured in days
Example: When the cash conversion cycle rose to 61 days, the finance team tightened credit terms.
tighten credit terms
to require faster payment or stricter conditions for customers who buy on credit
Example: They chose to tighten credit terms for new orders to reduce late payments.
stress testing
analyzing how financial results change under difficult or extreme conditions
Example: Through stress testing, they saw a covenant breach could happen in November.
leverage covenant
a loan requirement that limits how much debt a company can have relative to earnings
Example: If earnings fall, the leverage covenant can be breached even without new borrowing.
covenant headroom
the margin of safety between current financial ratios and the limits set by lenders
Example: They had 18% covenant headroom, but it could disappear if EBITDA declined.
discretionary capex
optional spending on long-term assets that can be delayed or canceled
Example: The new warehouse looked like discretionary capex, so they paused it.
risk appetite statement
a formal description of how much risk an organization is willing to accept
Example: A risk appetite statement helped the board agree to protect liquidity over growth.
ring-fence
to protect a budget, team, or activity so it cannot be cut or affected
Example: They decided to ring-fence cybersecurity spending despite broader cost controls.
Learning tips
Apply these focused strategies to get more value from the audio and questions.
- While listening, write down every number and date you hear, then check how each one supports a decision.
- Practice paraphrasing key finance phrases (e.g., covenants, working capital) in simpler English without changing the meaning.
- After listening once, summarize the speaker’s plan in three steps: immediate actions, next-month actions, and contingency triggers.
Post-listening questions
Use these reflection prompts to summarize what you heard and practice speaking or writing.
- 1
If you were the board chair, which of Maya’s proposals would you approve immediately, and why?
- 2
How would you balance tightening credit terms with maintaining customer relationships during a downturn?
- 3
What information would you want to see in a risk appetite statement for the next two quarters?
- 4
How should leaders communicate cost controls to employees to reduce rumors and anxiety?