Dilution refers to the loss in existing shareholder's equity. This happens when the company issues new shares, thereby increasing the number of outstanding shares, and subsequently reducing the value of existing shares. As a result, existing shareholders' ownership percentage and control over the company also decrease.

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Dilution Refers To

Question 5

Multiple Choice

Dilution refers to:

A) the increase in stock value due to wider ownership of stock.
B) the loss in existing shareholder's equity.
C) the loss in new shareholder's equity.
D) the loss in all shareholder's equity, both existing shareholders and new shareholders.
E) None of the above.

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