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. 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. States that common stock dividends cannot be paid if the company has not paid its preferred stock dividends. O Bond indenture O Impairment of capital rule Preferred stock restriction 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 Favors a Favors a High Payout Low Payout 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 O source of funding. A closely held firm has a majority of its shareholders in high marginal tax brackets A firm that can increase its debt ratio without raising its weighted average cost of capital sharply is have a stable dividend policy likely t more less