Which one of the following statements concerning bankruptcy is correct?
A) The administrative costs incurred in a bankruptcy are considered indirect bankruptcy costs.
B) Bondholders have a greater incentive than stockholders to keep a firm from filing for bankruptcy.
C) Bankruptcy is sometimes used as a means to increase payroll costs.
D) The assets of a firm tend to increase in value when a firm is in financial distress.
E) An implicit cost of bankruptcy is the loss of key employees.

Question

Quizplus · Accepted Answer

E) An implicit cost of bankruptcy is the loss of key employees. This is correct because during financial distress and bankruptcy, firms often face the risk of losing key employees who may seek more stable employment opportunities, which is considered an implicit or indirect cost of bankruptcy.

Which One of the Following Statements Concerning Bankruptcy Is Correct