Dilution of Earnings Occurs Because

question 64

Multiple Choice

Dilution of earnings occurs because

• A) a new issue of common stock creates more shares outstanding, which often 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 options are correct.

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Definitions:

Associated Account

An account linked or related to another in accounting, often used to track transactions connected to a specific business activity or party.

Plant Assets

Long-term tangible assets that are used in the production of goods or services and are not intended for sale.

Depreciated

A measure of the reduction in the value of an asset over time, often used for accounting and tax purposes.

Unearned Revenue

Money received by a company for a service or product that has yet to be provided or delivered.