Which of the following is the best deﬁnition of ﬁnancial distress costs?
A) A legal proceeding for liquidating or reorganizing a business. Also, the transfer of some or all of a ﬁrm's assets to its creditors.
B) The direct and indirect costs associated with going bankrupt or experiencing ﬁnancial distress.
C) The equity risk that comes from the ﬁnancial policy (i.e., capital structure) of the ﬁrm.
D) The use of personal borrowing to change the overall amount of ﬁnancial leverage to which the individual is exposed.
E) The diﬃculties of running a business that is experiencing ﬁnancial distress.

Question

Quizplus · Accepted Answer

Financial distress costs refer to the direct and indirect costs associated with going bankrupt or experiencing financial distress. These costs can include legal fees, lost revenue from decreased customer confidence, and the costs of restructuring or reorganizing the business.

Which of the Following Is the Best Deﬁnition of ﬁNancial