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

The costs of avoiding a bankruptcy filing by a financially distressed firm are classified as indirect bankruptcy costs. These costs include the expenses associated with restructuring the firm's operations or negotiating with creditors. Direct bankruptcy costs refer to the expenses incurred during the actual bankruptcy process, while flotation refers to the costs of issuing new securities to raise capital. Financial solvency and capital structure are broader concepts not specific to avoiding bankruptcy.

The Costs of Avoiding a Bankruptcy ﬁLing by a ﬁNancially