Question
Which of the following statements isFALSE? A. Bankruptcy is a long and complicated process that imposes both direct and indirect costs on the firm and
Which of the following statements isFALSE?
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.
Bankruptcy is rarely simple and straightforwardequity holdersdon't just"hand thekeys" to debt holders the moment the firm defaults on a debt payment.
C.
When a firm fails to make a required payment to debtholders, it is in bankruptcy.
D.
With perfect capitalmarkets, 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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