Which of the following is the best definition of financial distress costs? Multiple Choice

The direct and indirect costs associated with going bankrupt or experiencing financial distress.

The difficulties of running a business that is experiencing financial distress.

The costs that are directly associated with bankruptcy, such as legal and administrative expenses.

Theory that a firm borrows up to the point where the tax benefit from an extra dollar in debt is exactly equal to the cost that comes from the increased probability of financial distress.

The equity risk that comes from the financial policy (i.e., capital structure) of the firm.