Direct costs of bankruptcy do not include:
A) loss of tax losses.
B) accounting and legal fees.
C) agency costs.
D) all of the above are examples of direct costs of bankruptcy.

Question

Quizplus · Accepted Answer

Direct costs of bankruptcy refer to the expenses that are directly incurred during the bankruptcy process, such as filing fees, trustee fees, and administrative costs. Loss of tax losses and accounting and legal fees are examples of indirect costs or consequences of bankruptcy, while agency costs refer to the expenses that arise from conflicts of interest between different stakeholders in the bankruptcy process. Therefore, the correct answer is C, as agency costs are not included in the direct costs of bankruptcy.

Direct Costs of Bankruptcy Do Not Include