A company must adhere to the provisions of the Companies Act while taking the dividend decision Iden...........

A company must adhere to the provisions of the Companies Act while taking the dividend decision. Identify the related factor of dividend decision being mentioned in the above line.

Contractual constraints

Legal constraints

Access to capital market

Preferences of shareholders

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Explanation:

- Legal constraints: Companies must follow laws and regulations like those in the Companies Act when making dividend decisions. These laws ensure that dividends are paid from profits and protect creditors and shareholders' interests.

- Correct Answer: Option 2 - Legal constraints

- Contractual constraints: Sometimes, a company might have agreements with lenders or investors that limit its ability to pay dividends until certain financial conditions are met.

- Access to capital market: Companies with easy access to new capital might pay more dividends as they can raise funds easily.

- Preferences of shareholders: Companies might consider the dividend preferences of their shareholders to maintain good relations and satisfy their expectations.