It has been observed that, when ﬁrms get into ﬁnancial trouble, they often ﬁnd it diﬃcult to attract
and retain high-quality employees. The additional costs incurred in this situation would be
considered direct bankruptcy costs.

Question

Quizplus · Accepted Answer

Direct bankruptcy costs refer to the explicit costs associated with the legal and administrative process of bankruptcy, such as legal fees and court costs. The difficulty in attracting and retaining employees is considered an indirect bankruptcy cost, as it affects the firm's operations and performance but is not a direct expense of the bankruptcy process itself.

It Has Been Observed That, When ﬁRms Get into ﬁNancial