Although Stock Splits Do Not Add Any Value to a Firm

question 5

True/False

Although stock splits do not add any value to a firm, investors tend to react positively to stock splits because management isn't likely to initiate a stock split if the firm's prospects are poor.

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Definitions:

Depletion Expense

The allocation of the cost of natural resources over their productive lives, recognizing the reduction in natural resource value as it is extracted and sold.

Mining Site

A specific area where minerals are extracted from the earth, which can include both underground and surface mining operations.

Depletion

The allocation of the cost of natural resources over their useful life, typically related to mining, quarrying, drilling, or timber operations.

Amortization

The gradual write-off of the cost of an intangible asset over its useful life, similar to depreciation for tangible assets.