Indirect Costs of Financial Distress

question 31

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.

---

Definitions:

Safety Products Division

A designated unit within an organization focusing on the development, production, and distribution of safety-related products.

Transfer Price

The price at which goods or services are traded between departments within the same company or between subsidiaries.

Transfer Price

The price at which goods or services are sold between departments or subsidiaries within the same organization.

Transfer Price

The cost at which products and services are exchanged between departments within the same corporation.