XYZ Limited is a company dealing in auto products. The company is earning high profits but is short on cash, so it has decided to declare less dividends in the current financial year. Identify the factor related to dividend decision being described in the above lines.

Stability of earnings Stability of dividend Growth Opportunities Cash Flow Position

Cash Flow Position

Cash Flow Position: The payment of dividend involves an outflow of cash. A company may be earning profit but may be short on cash. Availability of enough cash in the company is necessary for declaration of dividend.