The Options for ALL three boxes are:

A: Increases the ability to pay dividends

B: Decreases the ability to pay dividends

2. Factors affecting dividends Aa Aa 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 Net income increases. More profitable investment opportunities are available The firm increases its debt ratio. Effect on ability to pay dividends Increases the ability to pay dividends Decreases the ability to pay dividends