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Basic Question 1 of 2
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%.
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Learning Outcome Statements
calculate and interpret dividend coverage ratios based on 1) net income and 2) free cash flow;
identify characteristics of companies that may not be able to sustain their cash dividend.
CFA® 2025 Level II Curriculum, Volume 3, Module 16.