Question

Which of the following statements is FALSE?A. Indirect costs are typically much smaller than the direct costs of bankruptcy.B. Bankruptcy protection can be used by management to delay the liquidation of a firm that should beshut down.C. Because many aspects of the bankruptcy process are independent of the size of the firm, the costsare typically higher, in percentage terms, for smaller firms.D. Aside from the direct legal and administrative costs of bankruptcy, many other indirect costs areassociated with financial distress (whether or not the firm has formally filed for bankruptcy). Further,indirect costs of bankruptcy are difficult to measure accurately.

Answer 1

Answer: The statement "A. Indirect costs are typically much smaller than the direct costs of bankruptcy." Is FALSE.

Explanation: The indirect costs of bankruptcy are difficult to measure accurately, so in some cases they may be equal to or greater than the direct legal and administrative costs of bankruptcy because they are associated with financial difficulties.