The term \"financial distress costs\" includes which of the following? I. Direct

Question

The term "financial distress costs" includes which of the following?

I. Direct bankruptcy costs
II. Indirect bankruptcy costs
III. Direct costs related to being financially distressed, but not bankrupt
IV. Indirect costs related to being financially distressed, but not bankrupt
A. I only
B. III only
C. I and II only
D. III and IV only
E. I, II, III, and IV
F. None of the above.

The term "financial distress costs" includes which of the following? Direct bankruptcy costs Indirect bankruptcy costs Direct costs related to being financially distressed, but not bankrupt Indirect costs related to being financially distressed, but not bankrupt I only III only I and II only III and IV only I, II, III, and IV None of the above.

Explanation / Answer

The correct option is B. (Direct costs related to being financially distressed, but not bankrupt)

Explanation:-

Financial distress costs are occurred due to delay in the repayment of owed amount by the business entities. If they still continued in the same situation, the firm (which give the credit to business entities) can force the owing entity into liquidation or bankruptcy.

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