-whether a cash dividend is affordable.
-how increases in asset accounts have been financed
-whether long-term assets are being financed with long-term or short-term financing

The affordability of cash dividends can be determined by examining the company's financial statements and determining its profitability, liquidity and financial leverage. The company's current and past earnings, cash flow and solvency all factor into whether a cash dividend is affordable. Increases in asset accounts are usually funded through debt or equity financing. If a company borrows money to fund increases in its asset accounts (such as accounts receivable, inventory, and plant and equipment), it is considered short-term financing. If a company sells shares of common stock to increase its asset accounts, it would be considered long-term financing. Long-term asset purchases are typically funded through long-term financing since the asset will be in use for a longer period of time.