Lenders Will Sometimes Impose Dividend Restrictions To

question 273

Multiple Choice

Lenders will sometimes impose dividend restrictions to:

• A)prevent the corporation from paying out too much to stockholders.
• B)try to limit available dividends.
• C)prevent the corporation from paying out too much to other creditors.
• D)ensure the lenders will receive more dividends than the stockholders.

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Definitions:

Capital Intensity Ratio

A measure of how much capital is used in production compared to other factors like labor; high ratios suggest a reliance on physical assets and machinery.

Capacity

refers to the maximum level of output that a company can sustain to produce goods or services under normal working conditions.

Retention Ratio

This metric indicates the percentage of net income a firm retains to reinvest in its business rather than distributing to shareholders as dividends.

Dividend Payout Ratio

The fraction of earnings a company pays out to its shareholders in the form of dividends.