Based on your understanding of the constraints on dividend payments, identify the type of constraint this...
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Based on your understanding of the constraints on dividend payments, identify the type of constraint this condition represents. Assume that all other factors are held constant. O Impairment of capital rule O Availability of cash Penalty tax Bond indenture A company's dividend policy can also be affected by factors internal to the organization and by the external (macroeconomic) environment in which the business operates. In the table that follows, identify which factors, in general, tend to favor high or low dividend payout ratios. Factor Favors a High Payout Favors a Low Payout O A company has a large retained earnings balance on its balance sheet but has very little cash and almost no other liquid assets. A company has an established credit line that it can access when it needs an external source of funding. In an inflationary environment, a firm has to increase its cash balances to meet the rising prices of its inventory, wages, and other short-term liabilities. When a firm has a large number of profitable investment opportunities, it will usually have a target payout ratio. A firm with flotation costs is more likely to have a high dividend payout ratio. Based on your understanding of the constraints on dividend payments, identify the type of constraint this condition represents. Assume that all other factors are held constant. O Impairment of capital rule O Availability of cash Penalty tax Bond indenture A company's dividend policy can also be affected by factors internal to the organization and by the external (macroeconomic) environment in which the business operates. In the table that follows, identify which factors, in general, tend to favor high or low dividend payout ratios. Factor Favors a High Payout Favors a Low Payout O A company has a large retained earnings balance on its balance sheet but has very little cash and almost no other liquid assets. A company has an established credit line that it can access when it needs an external source of funding. In an inflationary environment, a firm has to increase its cash balances to meet the rising prices of its inventory, wages, and other short-term liabilities. When a firm has a large number of profitable investment opportunities, it will usually have a target payout ratio. A firm with flotation costs is more likely to have a high dividend payout ratio.
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