- CFA Exams
- CFA Level I Exam
- Topic 4. Corporate Issuers
- Learning Module 18. Analysis of Dividends and Share Repurchases
- Subject 8. Analysis of Dividend Safety
CFA Practice Question
Which is the most likely a warning sign of dividend sustainability?
B. FCFE coverage ratio: 1.0.
C. Debt-equity-ratio: 20%.
A. Dividend coverage ratio: 2.5.
B. FCFE coverage ratio: 1.0.
C. Debt-equity-ratio: 20%.
Correct Answer: B
This indicates that the company is returning all available cash to shareholders. The practice is not sustainable.
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