Question

A company issues 5,000 shares of $15 par common stock. As a result, the earnings per share of the company _____.

Answer 1

c. decrease

Step-by-step explanation:

Options "a. increases, b. remains unchanged, c. decreases, d. equals to $15"

Earnings per share = Net income available for common shareholders / Number of shares outstanding.

So with increase in number of shares outstanding, the earnings per share would decrease as net income would be spread over higher number of shares. So in this case, if company issues further 5,000 shares, the number of shares outstanding would increase and thus the earnings per share would decrease.