Which of the following cash flows are costs of financial distress?

a). The court costs (court fees, lawyers, etc.) incurred when a firm enters bankruptcy.

b). The interest payments that the firm fails to make to the bondholders

c). Lost sales because customers do not want to buy products that might require future servicing (e.g. a dishwasher) from a firm that is likely to go bankrupt.

d). The firm being forced to quickly sell assets for less than they are worth in order to make payments to banks or bondholders.

e). The firm stopping dividend payments to shareholders in order conserve the cash needed to make interest payments to creditors.

Answer rating: 100% (QA)

All of the options tell about the expenses that the ... View the full answer