Understanding of constraints on dividend payments

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Based on your understanding of constraints on dividend payments, identify the type of constraint this condition represents. Assume that all other factors held constant. A. Penalty tax. B. Bond Indenture C. Availability of cash D. Impairment of capital rule.

Out of the following 3 factors, identify which factors tend to favor high or low payout ratios:

1. Taxes on capital gains are deferred until the capital gain is realized, but taxes on dividends are due in the year in which they are received.

2. A firm has an established credit line for access to external sources of funding

3. Due to inflationary environment, a firm has to increase cash balances to meet the rising of accounts payable and other short-term liabilities.

Reference no: EM13948623

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