Dilution of earnings occurs because
A) a new issue of common stock creates more shares outstanding which reduces earnings per share temporarily.
B) the company suffers a decline in earnings after taxes.
C) the investment banker collects an underwriting fee.
D) all of these.

Question

Quizplus · Accepted Answer

Dilution of earnings occurs when a new issue of common stock is made, which creates more shares outstanding. This reduces earnings per share temporarily as the same earnings are now distributed among a larger number of shares. The other options (B and C) are not directly related to dilution of earnings.

Dilution of Earnings Occurs Because