Which of the following statements regarding financial distress is (are)true?
I.Firms in financial distress always end up in bankruptcy.
II.Firms can postpone bankruptcy for many years.
III.Ultimately, the firm may recover from financial distress and avoid bankruptcy altogether.
A)I only
B)II only
C)II and III only
D)III only

Question

Quizplus · Accepted Answer

Firms can postpone bankruptcy by taking measures such as restructuring debt or cutting costs. Ultimately, the firm may recover from financial distress and avoid bankruptcy altogether. Therefore, statements II and III are true. Statement I is not true as some firms are able to avoid bankruptcy despite experiencing financial distress.

Which of the Following Statements Regarding Financial Distress Is (Are)true