An Action on the Part of a Firm That Increases

question 24

True/False

An action on the part of a firm that increases the level of expected cash flows without a corresponding increase in risk should reduce share value; an action that reduces the level of expected cash flows without a corresponding decline in risk should increase share value.

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Definitions:

Reformation

A legal process to correct or modify a written agreement or document that inaccurately reflects the parties' intentions due to error or fraud.

Punitive Damages

Financial compensation awarded to a plaintiff to punish the defendant for especially harmful behavior, beyond simple compensation.

American Rule

A legal principle that states each party involved in a lawsuit covers their own attorney fees, regardless of the outcome of the case.

Attorney Fees

The charges that a client pays to a lawyer for legal services provided, which may be calculated in various ways including hourly rates, flat fees, or contingency fees.