- 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 insustainability?
A. Dividend payout ratio: 90%.
B. FCFE coverage ratio: 2.5.
C. Debt-equity-ratio: 30%.
Explanation: With such a high dividend payout ratio, a relatively small percentage decline in earnings could cause the dividend not to be payable out of earnings.
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