The costs of avoiding bankruptcy filing by a financially distressed firm are classified as:

A. Capital structureB. Direct bankruptcyC. Financial solvencyD. FlotationE. Indirect bankruptcy

Option E is correct (Indirect bankruptcy)

Explanation:

Option E is correct (Indirect bankruptcy)

Bankruptcy:

It is a legal proceeding when a firm or business can not repay his debts.

Financially Distressed Firm:

When company unable to pay its debts due financial crisis.

Types of Costs:

Direct Bankruptcy Costs Indirect Bankruptcy Costs

Direct Bankruptcy Costs:

These are the costs which firm pays to handle the case and filing the bankruptcy case. It includes attorneys, who handle the case, and accountants. It greatly affect the company value and reputation.

Indirect Bankruptcy Costs:

The costs of avoiding bankruptcy filing by a financially distressed firm. It is the cost which company have to pay to stay away from bankruptcy case.