The issuance of stock decreases a company's assets and increases its stockholders' equity.

Question

Quizplus · Accepted Answer

The issuance of stock increases a company's assets (cash or other assets received from issuing the stock), but does not affect stockholders' equity until the stock is sold at a price higher than its original cost. This is because the stock issuance increases the number of outstanding shares, which dilutes the ownership percentage of existing shareholders and reduces their share of the company's earnings and assets. Only after the stock is sold at a higher price than its original cost does the company realize additional shareholder equity.

The Issuance of Stock Decreases a Company's Assets and Increases