Indirect Costs of fiNancial Distress

question 5

Multiple Choice

Indirect costs of financial distress:

• A)effectively limit the amount of equity a firm issues.
• B)serve as an incentive to increase the financial leverage of a firm.
• C)include direct costs such as legal and accounting fees.
• D)tend to increase as the debt-equity ratio decreases.
• E)include the costs incurred by a firm as it tries to avoid seeking bankruptcy protection.

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Definitions:

State Court

Courts that have jurisdiction over disputes involving state laws and constitutions.

Federal Jurisdiction

The legal authority granted to federal courts and agencies to hear and decide cases that involve the U.S. Constitution, federal laws, disputes between states, or parties from different states.

Court of Appeals for the Federal Circuit

A specific United States appellate court with jurisdiction over several areas, including international trade, government contracts, patents, and trademarks.

United States Court of Federal Claims

A federal court that hears monetary claims against the U.S. government.