Which one of the following is not a bankruptcy cost?
A)The legal costs that the firm incurs in the bankruptcy process
B)The risk premium increase in the bond yield
C)The costs involved with managers hiding information from shareholders
D)The damage to the company's trademark and intangible assets

Question

Quizplus · Accepted Answer

The costs involved with managers hiding information from shareholders are not bankruptcy costs. They may lead to the bankruptcy of the company, but they are not a direct cost of the bankruptcy process. A, B, and D are all bankruptcy costs. Legal costs are incurred during the bankruptcy process, a risk premium increase in the bond yield reflects the higher risk of default, and damages to the company's trademark and intangible assets may occur during the bankruptcy process.

Which One of the Following Is Not a Bankruptcy Cost