Which of the following is the best definition of bankruptcy?
A) A legal proceeding for liquidating or reorganizing a business. Also, the transfer of some or all of a firm's assets to its creditors.
B) The direct and indirect costs associated with going bankrupt or experiencing financial distress.
C) The equity risk that comes from the financial policy (i.e., capital structure) of the firm.
D) The use of personal borrowing to change the overall amount of financial leverage to which the individual is exposed.
E) The difficulties of running a business that is experiencing financial distress.

Question

Quizplus · Accepted Answer

Bankruptcy is a legal process through which individuals or businesses who cannot repay debts to creditors may seek relief from some or all of their debts. Option A accurately describes this process, including both the liquidation and reorganization aspects, as well as the transfer of assets to creditors.

Which of the Following Is the Best Definition of Bankruptcy