Question

which two of the following are broad types of costs of financial distress? multiple select question. indirect costs direct costs reorganization costs liquidation costs

Answer 1

The two broad types of costs of financial distress are direct costs, such as legal fees, and indirect costs, such as loss of customers, both of which affect a company's finances.

Step-by-step explanation:

The two broad types of costs of financial distress are direct costs and indirect costs.

Direct costs are those that a company can measure more easily and include expenses such as legal fees, administrative costs, and other expenditures directly associated with the process of dealing with financial distress.

Indirect costs, on the other hand, are more difficult to quantify and include loss of customers, employee morale issues, supplier relations problems, and the potential for reduced credit terms, all leading to a potential revenue downturn as a result of the company's financial struggles.