Aside from the direct legal and administrative costs of bankruptcy, there are many other Indirect costs associated with financial distress (whether or not the firm has formally filed for bankruptcy). While these costs are difficult to measure accurately, they are often larger than the direct costs of bankruptcy. Discuss at least three examples of indirect costs. Try not to pick three obvious... go at least for one that you are not familiar with. For example: Loss of customers, loss of suppliers, loss of employees, loss of receivables, fire sales of assets, inefficient liquidation, costs to creditors, .... etc. 1. Loss of customers- When there is financial distress with a company, there may be a loss of customers because of the fear of impaired service and loss of trust. For example, when General Motors and Chrysler were experiencing financial difficulties, many customers lost confidence in their automobiles. Potential customers might not want an automobile from a bankrupt company because they fear that the company may not honor the warranty or it may be difficult finding replacement parts.
- Fall '09
- Bankruptcy, Financial distress, fiat