Dilution of earnings occurs because
A) a new issue of common stock creates more shares outstanding that reduces earnings per share temporarily.
B) the company suffers a decline in earnings aftertaxes.
C) the investment dealer collects an underwriting fee.
D) all of the other answers are correct

Question

Quizplus · Accepted Answer

Dilution of earnings occurs when a company issues new shares of common stock, which increases the number of shares outstanding and reduces earnings per share temporarily. This is because the company's total earnings are now spread over more shares, decreasing the earnings per share for each shareholder. The other options listed are not correct explanations for dilution of earnings.

Dilution of Earnings Occurs Because