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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
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 states that common dividends cannot be paid if the company has not paid its preferred stock dividends. 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. Having the ability to accelerate or delay projects makes it for a firm to adhere to a stable dividend policy. A firm that can adjust its debt ratio without raising its weighted average cost of capital (WACC) sharply is likely to have a stable dividend policy
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