Dilution in Earnings Per Share Occurs When a Company with

question 37

Multiple Choice

Dilution in earnings per share occurs when a company with

• A)a high P/E ratio buys a company with a low P/E ratio.
• B)a low P/E ratio buys a company with a high P/E ratio.
• C)a high growth rate in earnings per share buys a company with a low growth rate in earnings per share.
• D)a low growth rate in earnings per share buys a company with a high growth rate in earnings per share.

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Definitions:

Profit Margins

The difference between the cost of goods sold and the sales revenue, expressed as a percentage of sales revenue, indicating the profitability of a product or business.

Sales Volume

The total number of units sold within a specified time period, often used as a measure of business performance.

Ethical Conduct

Adherence to moral principles and standards of behavior in professional and personal actions.

Ethics

Moral principles that govern the behavior of individuals and organizations in conducting their business.