The purpose of the present study is to investigate the effects of free cash flows and investment opportunity set on debt and dividend policies of the firms listed in Tehran stock exchange. In this vein, the study tests four main hypotheses and six subordinate hypotheses by choosing 117 firms among firms listed in Tehran Stock Exchange for a period of 5 years (1383-1387). For data analysis Pearson correlation, partial correlation, linear regression, and factor analysis are applied. The results obtained from the data analysis represent that there is a significant and negative correlation between free cash flows and debt policy. But there is no significant correlation between investment opportunities set and companies debt policy. Moreover, there is no significant correlation between free cash flows and companies’ dividend policy. Meanwhile there is a significant and positive correlation between investment opportunity set and dividend policy. The results of this investigation also reveal that there is a positive and significant relationship between the size and debt policy but there is no significant relationship between the size and dividend policy