Which one of the following is a direct cost of bankruptcy?
A) Bypassing a positive NPV project to avoid additional debt
B) Investing in cash reserves
C) Maintaining a debt-equity ratio that is lower than the optimal ratio
D) Losing a key company employee
E) Paying an outside accountant to prepare bankruptcy reports

Question

Quizplus · Accepted Answer

Paying an outside accountant to prepare bankruptcy reports is a direct cost of bankruptcy as it is a cost incurred specifically due to the bankruptcy process. The other options are not direct costs of bankruptcy but rather strategic decisions or consequences of bankruptcy.

Which One of the Following Is a Direct Cost of Bankruptcy