The Explicit and Implicit Costs Associated with Corporate Default Are

question 247

Multiple Choice

The explicit and implicit costs associated with corporate default are the ___________ of the firm.

• A) Flotation costs.
• B) Default beta coefficients.
• C) Direct bankruptcy costs.
• D) Indirect bankruptcy costs.
• E) Financial distress costs.

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Definitions:

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.

Statement of Cash Flows

A financial document that provides detailed information about the cash inflows and outflows for a business over a specific period of time.

Operating

Pertaining to the core activities necessary for a business to function, including production, sales, and distribution.

Financing

The process of providing or securing funds for business activities, making purchases, or investing.