Question
Which of the following statements is FALSE? A.Bankruptcy is a long and complicated process that imposes both direct and indirect costs on the firm and
Which of the following statements is FALSE?
A.Bankruptcy is a long and complicated process that imposes both direct and indirect costs on the firm and its investors that the assumption of perfect capital markets ignores.
B.When a firm fails to make a required payment to debt holders, it is in bankruptcy.
C.Bankruptcy is rarely simple and straightforwardequity holders don't just "hand the keys" to debt holders the moment the firm defaults on a debt payment.
D.With perfect capital markets, the risk of bankruptcy is not a disadvantage of debtbankruptcy simply shifts the ownership of the firm from equity holders to debt holders without changing the total value available to all investors.
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