Dilution of Earnings Occurs Because

question 67

Multiple Choice

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.

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Definitions:

Significance Level

A precisely rephrased term for the threshold of probability at which we accept or reject the null hypothesis in statistical testing.

T-statistic

A type of statistic used in hypothesis testing, calculated by dividing the difference between the sample mean and the hypothesized population mean by the standard error of the mean.

Alpha

A statistical significance level often set at 0.05 or 5%, indicating the probability threshold below which the observed data are considered statistically significant.

Null Hypotheses

The null hypothesis is a statement in statistical hypothesis testing that assumes no effect or no difference in the case of the study, serving as the default or initial assumption.