Which of the following acts as a constraint on dividend paym

Which of the following acts as a constraint on dividend payments?

Removal of the impairment of capital rule

Excess availability of cash

Debt contract restrictions

Low cost of equity

Non availability of investment opportunities

Solution

Correct option is > Debt contract restrictions

Debt contract can impose the restriction on dividend payments because debtor would want to secure the cash against debt obligation. This restriction can be forced through bond indentures or debt agreements.