Dividend decisions are complicated and involve the understanding of critical str
ID: 2737011 • Letter: D
Question
Dividend decisions are complicated and involve the understanding of critical strategic factors that affect the policy and value of a firm. Thus, the management of any firm has to consider the constraints on dividend payments, the availability and cost of alternative sources of capital, and other external factors when they create and implement their dividend policy. The often stipulates that no dividends can be paid unless the current ratio, times -interest-earned ratio, and other safety ratios exceed stated minimums. Along with several constraints, several internal factors within a company and external macroeconomic factors affect a firm's dividend policy. In the table, identify which factors, in general, tend to favor high or low payout ratios. 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.Explanation / Answer
1. The Dividend policy often...
2. a) Favours a Low Payout
b) Favours a High Payout
c) Favours a Low Payout
3. ....have a low target payout...
4. A firm with Low floataion cost..