Indirect Bankruptcy Costs

question 384

Multiple Choice

Indirect bankruptcy costs:

• 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.

---

Definitions:

Progressive Tax System

A tax that increases as income increases; the percentage or rate increases.

Income

The money received, especially on a regular basis, for work or through investments.

Head of Household

A filing status for individual U.S. taxpayers who are unmarried and pay more than half the cost of maintaining a home for themselves and a qualifying person.

Total Income

The sum of all earnings or revenues received by an individual or organization, before any deductions or taxes.