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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 dividend payments cannot exceed the balance sheet item "retained earnings." 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. 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
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