The explicit and implicit costs associated with corporate default are referred to as the ________ costs of a firm.
A)flotation
B)default beta
C)direct bankruptcy
D)financial distress
E)indirect bankruptcy

Question

Quizplus · Accepted Answer

The explicit costs of corporate default include legal and administrative expenses, while implicit costs include damage to the firm's reputation, loss of customer and supplier goodwill, and loss of employee morale. These costs are collectively referred to as the financial distress costs of a firm.

The Explicit and Implicit Costs Associated with Corporate Default Are