9. Factors that influence dividend policy Distribution 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 distribution policy. Consider the following restriction: Restrictions on dividend payments not to exceed the total amount of retained earnings on a firm's balance sheet. 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. Bond indenture Availability of cash Impairment of capital rule Option contract 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. 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. When a firm has a large number of profitable investment opportunities, it will usually have a target payout ratio. If management is concerned with keeping control of the company, it will be likely to retain hings than it otherwise would to avoid diluting control by issuing new stock to raise capital. Continue without saving 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