Question

Which one of the following is least apt to limit the amount of cash dividends a firm can pay?

O Lack of retained earnings
O A bond indenture covenant
O State laws
O A bankruptcy proceeding
O Increasing stock price

Answer 1

The increasing stock price is least likely to limit the amount of cash dividends a firm can pay.

Step-by-step explanation:

The least likely to limit the amount of cash dividends a firm can pay is the increasing stock price.

Lack of retained earnings, a bond indenture covenant, state laws, and a bankruptcy proceeding can all limit the amount of cash dividends a firm can pay.

However, an increasing stock price does not directly limit the amount of cash dividends a firm can pay. In fact, a higher stock price may even attract more investors and potentially increase the firm's ability to pay dividends.