Which of the Following Is the Best Definition of Direct

question 46

Multiple Choice

Which of the following is the best definition of direct bankruptcy costs?

• A) The costs that are directly associated with bankruptcy, such as legal and administrative expenses.
• B) The cost of capital of a firm that has no debt.
• C) Theory that a firm borrows up to the point where the tax benefit from an extra dollar in debt is exactly equal to the cost that comes from the increased probability of financial distress.
• D) The equity risk that comes from the nature of the firm's operating activities.
• E) The tax saving attained by a firm from interest expense.

---

Definitions:

Profit

The financial gain made in a transaction or business operation, calculated by subtracting total expenses from total revenue.

B-Corp Certification

A certification for businesses that meet high standards of social and environmental performance, accountability, and transparency.

Sustainable Financial Basis

A state of financial stability that can be maintained over the long term without depleting resources.

Fair Trade

A social movement and market-based approach that aims to help producers in developing countries obtain fair payment for their goods and labor.