|Overview: Distress Cost|
Special costs associated with a firm that is in financial distress such as increased cost of capital, legal expenses and losses due to the need to liquidate assets quickly.
What are Distress Costs?
John Spacey, updated on July 12, 2023
Distress cost is a special category of cost faced by firms that are in financial distress such as a higher cost of capital.Financial distress is usually defined as breaking, or having difficulty in meeting, the terms of agreements with creditors. When this happens, a firm's cost of capital goes up to compensate for the risk of default. The firm may also be forced to sell assets quickly, resulting in losses. If a firm fails to recover their finances, there are also administrative, legal and accounting costs of bankruptcy. If the firm liquidates as the result of bankruptcy, the costs of the final liquidation is also a distress cost.
Business CostsThis is the complete list of articles we have written about business costs.
If you enjoyed this page, please consider bookmarking Simplicable.
A list of common types of business cost.
A principle of financial accounting.A list of common types of business cost.
A definition of cost escalation with an example.
Common examples of cost reduction.
The common types of cost estimate.A definition of relevant cost with examples.
Detailed examples of how to map out the cost structure of a business.
The definition of cost competition with examples.
An overview of cost goals with examples.A list of common business risks. The four things that can be done about risk. A list of techniques for reducing risk. The potential that you'll achieve too much of a good thing.
Any risk that people have a strong aversion too.
The surprising similarities between risk and opportunity.
The difference between risk management and contingency planning.The common types of uncertainty in decision making and strategy.
The common types of inventory risk.
An overview of common business risk management techniques.
TrendingThe most popular articles on Simplicable in the past day. Recent posts or updates on Simplicable. Site Map