Which of the following is not a direct cost of financial distress?
A) The loss of the use of tax loss carryovers
B) Legal and accounting costs experienced in a bankruptcy liquidation
C) Losses related to liquidation from reduced asset prices in distress sales
D) Opportunity cost of company making decisions to meet short-term cash needs instead of decisions it otherwise would have made

Question

Quizplus · Accepted Answer

The opportunity cost of a company making decisions to meet short-term cash needs instead of decisions it otherwise would have made is considered an indirect cost of financial distress, not a direct cost. Direct costs include legal and accounting fees, and losses directly associated with the process of resolving financial distress, such as asset liquidation losses or the loss of tax benefits.

Which of the Following Is Not a Direct Cost of Financial