Indirect costs of bankruptcy are born principally by:
A)bondholders.
B)shareholders.
C)managers.
D)the federal government.
E)the ﬁrm's suppliers.

Question

Quizplus · Accepted Answer

Shareholders bear the indirect costs of bankruptcy, which include the loss of reputation, loss of future business opportunities, and the reduced value of the firm's assets due to fire sales. Bondholders may also bear some indirect costs, but they have priority in receiving payments from the bankrupt firm's assets. Managers may also be affected by bankruptcy, but they are not the principal bearers of the indirect costs. The federal government may incur some costs related to bankruptcy proceedings, but these are not borne solely by the government. Suppliers may also be indirectly affected by a bankrupt firm, but they are not the principal bearers of the costs.

Indirect Costs of Bankruptcy Are Born Principally By