options for all boxes are either: a. increases the ability to pay dividends b. decreases the abililty to pay dividends

Factors affecting dividends Several factors affect a firm's ability to pay a dividend. Three such factors are described In the table below: profitability (an increase In net income), investment opportunities, and capital structure (an Increase In the debt ratio). Use the table to Indicate how a firm's ability to pay a dividend Is affected by the factors described. Consider each factor In Isolation, with everything else held the same. Factor Effect on ability to pay dividends Net income increases. More profitable investment opportunities are available. The firm increases its debt ratio