PROCESS THAT IMPOSES BOTH DIRECT AND INDIRECT COSTS ON THE FIRM / TUTORIALOUTLET DOT COM

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PROCESS THAT IMPOSES BOTH DIRECT AND INDIRECT
COSTS ON THE FIRM / TUTORIALOUTLET DOT COM
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PROCESS THAT IMPOSES BOTH DIRECT AND INDIRECT
COSTS ON THE FIRM / TUTORIALOUTLET DOT COM

• Process that imposes both direct and indirect
  costs on the firm 
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• 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. Is this description of bankruptcy
  realistic? No. Bankruptcy is rarely simple and
  straightforwardequity holders do not just hand
  the keys to debt holders the moment the firm
  defaults on a debt payment. Rather, bankruptcy is
  a long and complicatedprocess that imposes both
  direct and indirect costs on the firm and its
  investors, costs that the assumption of perfect
  capital markets ignores. The relative proportions
  of debt, equity, and other securities that a firm
  has outstanding constitute its capital structure.
  When corporations raise funds from outside
  investors, they must choose which type of
  security to issue. The most common choices are
  financing through equity alone and financing
  through a combination of debt and equity. We
  begin our discussion by consideringboth of these
  options.

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PROCESS THAT IMPOSES BOTH DIRECT AND INDIRECT
COSTS ON THE FIRM / TUTORIALOUTLET DOT COM
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