When a firm issues new stock, it always results in a dilution of earnings in the long run.
When dilution occurs because of a new issue, it typically takes time for the new equity infusion to boost earnings per share, but this condition is temporary in most cases.

Question

Quizplus · Accepted Answer

Issuing new stock can lead to dilution of earnings per share initially, but it does not always result in long-term dilution. The capital raised can be used for growth and expansion, potentially increasing future earnings.

When a Firm Issues New Stock, It Always Results in a Dilution