The options for this question are either 1. Decrease the ability to pay dividend

Question

The options for this question are either

1. Decrease the ability to pay dividends

2. Increase the ability to pay dividends

Several factors affect a firm's ability to pay a dividend. Three such factors are described in the table below: profitability (an increase in net income), investment opportunities, and capital structure (an increase in the debt ratio). Use the table to indicate how a firm's ability to pay a dividend is affected by the factors described. Consider each factor in isolation, with everything else held the same.

Explanation / Answer

Increase the ability to pay dividends

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