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. Often stipulates that no dividends can be paid unless the current ratio, times-interest-earned ratio, and other safety ratios exceed stated minimums. Bond indenture Preferred stock restriction Impairment of capital rule 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 firm that can increase its debt ratio without raising its weighted average cost of capital sharply is _____ likely to have a stable dividend policy