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If the amount of external funding is too high for the company, which of the following action can it take? a. Reducing its dividend payout b. Increasing its dividend payout c. Increasing its sales growth rate d. Reducing its accounts payables (in relation to sales)
a. Reducing its dividend payout, but it will discourage shareholders confidence and share price as well if for longer term.
Generally speaking an in increase in external funds (debts) will result in an increase in intrest obligation for a company and a reduction in net profits available to share holders(dividends). But, technically speaking the dividend payout, may not reduce as the company can decide to maintain the dividend payout from its accumulated profits inorder to gain the confidence of the shareholders and investors.
