The explicit and implicit costs associated with corporate default are the ___________ of the ﬁrm.
A) Flotation costs.
B) Default beta coeﬃcients.
C) Direct bankruptcy costs.
D) Indirect bankruptcy costs.
E) Financial distress costs.

Question

Quizplus · Accepted Answer

The costs associated with corporate default, both explicit (such as legal fees and bondholder recovery expenses) and implicit (such as loss of reputation and decreased future earnings potential), are considered financial distress costs.

The Explicit and Implicit Costs Associated with Corporate Default Are