The costs of avoiding a bankruptcy filing by a financially distressed firm are classified as _____ costs.
A) Flotation.
B) Direct bankruptcy.
C) Indirect bankruptcy.
D) Financial solvency.
E) Capital structure.

Question

Quizplus · Accepted Answer

Indirect bankruptcy costs refer to the costs associated with avoiding bankruptcy, such as the loss of customers, suppliers, or employees, and the overall impact on the firm's operations and reputation. These costs can be significant and often influence a firm's decision to try to avoid filing for bankruptcy.

The Costs of Avoiding a Bankruptcy Filing by a Financially