Which of the following would be considered an indirect bankruptcy cost?
A) The cost of the extra insurance the bankruptcy court requires the firm to carry on its assets.
B) The cost the firm must pay to the court when filing its bankruptcy petition.
C) The cost of the appraisals a firm must obtain on its assets by order of the bankruptcy court.
D) The fee the firm pays its lawyer to draw up the bankruptcy petition.
E) The cost to the firm of projects in-progress terminated in order to preserve cash.

Question

Quizplus · Accepted Answer

Indirect bankruptcy costs include the potential loss of business, damage to reputation, or operational disruptions, such as the cost to the firm of projects in-progress terminated in order to preserve cash. These costs are not directly related to the legal process of bankruptcy but are consequences of the firm's financial distress.

Which of the Following Would Be Considered an Indirect Bankruptcy