Which one of the following is an example of a direct bankruptcy cost?
A)Operating at a debt-equity ratio that is less than the optimal ratio
B)Reducing the dividend payout ratio as a means of increasing a firm's equity
C)Forgoing a positive net present value project to conserve current cash
D)Incurring legal fees for the preparation of bankruptcy filings
E)Losing a key customer due to concerns over a firm's financial viability

Question

Quizplus · Accepted Answer

Direct bankruptcy costs are expenses directly associated with the legal and administrative process of bankruptcy, such as legal fees for preparing bankruptcy filings.

Which One of the Following Is an Example of a Direct