Which of the following firms is more likely to use extraordinary dividends?

Question

Quizplus · Accepted Answer

Firms with cyclical sales experience fluctuations in their earnings and cash flows. When they have excess cash, they may use extraordinary dividends to distribute it to shareholders rather than keeping it on their balance sheet where it may not earn a high return during an economic downturn. Firms with stable sales would typically prefer to maintain a consistent dividend policy and may choose to use regular dividends instead of extraordinary dividends to distribute cash to shareholders. Firms with neither cyclical nor stable sales do not have a clear pattern of earnings and cash flow fluctuations, so it is difficult to determine their likelihood of using extraordinary dividends.

Which of the Following Firms Is More Likely to Use