The Contractual Rule That Requires an Exchange of Value

question 70

Multiple Choice

The contractual rule that requires an exchange of value

• A)is best explained through the doctrine of privity.
• B)generally requires proof that each party provided sufficient consideration, but it does not also require proof that each party provided adequate consideration.
• C)can be satisfied by the use of a seal because a seal is itself a form of valuable consideration.
• D)is based on the need for clear evidence of an agreement and therefore does not apply if the parties' agreement is written, rather than oral.
• E)cannot be satisfied by the provision of love and affection because that rule requires each party to provide a physical benefit, rather than services or actions.

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Definitions:

Capital Budgeting

The process businesses use to evaluate potential major projects or investments, assessing the value they may add to the company.

Capital Intensity Ratio

A metric that measures the amount of capital needed per unit of output, indicating how capital-intensive a business is.

External Financing Needed (EFN)

The amount of financing required to balance both sides of the statement of financial position.

Dividend Payout Ratio

A financial ratio that measures the percentage of net income a firm pays out to its shareholders as dividends.