Indirect bankruptcy costs will often increase when a firm is in financial stress and it may even push the company into bankruptcy.

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Indirect bankruptcy costs refer to the costs incurred by a company due to bankruptcy, which may not be directly related to the bankruptcy process. These costs can include lost sales, damaged reputation, lower employee morale, and decreased shareholder value. When a company is in financial stress, these indirect bankruptcy costs may increase, making it harder for the company to recover and ultimately leading it to file for bankruptcy.

Indirect Bankruptcy Costs Will Often Increase When a Firm Is