Which One of the Following Statements Concerning Bankruptcy Is Correct

Multiple Choice

Which one of the following statements concerning bankruptcy is correct?

A) A firm is considered bankrupt when it becomes delinquent on a loan payment.
B) The administrative expenses of a bankruptcy are classified as indirect bankruptcy costs.
C) Bankruptcy costs may offset the tax-related gains from leverage.
D) The higher cost of capital which a firm pays in order to avoid excessive debt is considered a direct cost of bankruptcy.
E) Bankruptcy is a relatively inexpensive process.