Indirect bankruptcy costs
A)effectively limit the amount of equity a firm issues.
B)serve as an incentive to increase the financial leverage of a firm.
C)tend to increase as the debt-equity ratio decreases.
D)include the costs incurred by a firm as it tries to avoid seeking bankruptcy protection.
E)include the legal and accounting fees incurred during the bankruptcy process.

Question

Quizplus · Accepted Answer

Indirect bankruptcy costs refer to the expenses a firm incurs in efforts to avoid bankruptcy, such as management time spent on restructuring or renegotiating debt, rather than direct costs like legal fees.

Indirect Bankruptcy Costs