Which three of the following are most likely to be costs of financial distress?
A) Management may give excessive emphasis to short- term liquidity.
B) More efficient long- term management of the firm
C) If assets are to be be sold quickly the price may be very low.
D) Uncertainties in suppliers' minds about dealing with this firm

Question

Quizplus · Accepted Answer

A) Financial distress may lead to management prioritizing short-term liquidity over making long-term strategic decisions in order to avoid default. This can be detrimental to the long-term success of the firm.
C) When a firm is in financial distress and must sell assets quickly in order to raise funds, buyers may be aware of the urgency and use it to their advantage, resulting in a lower sale price for the assets.
D) Financial distress can lead to uncertainty among suppliers about the firm's ability to meet its obligations, which could result in suppliers refusing to do business with the firm or demanding payment upfront, which will further increase financial strain on the firm.

Which Three of the Following Are Most Likely to Be