a company sells its stocks to raise cash what is affected?



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this question was asked in the quiz following the 3 statement model lecture and according to the answer shareholders equity increases but according to me it should remain same because although cash is increasing ,stocks( a current asset) are decreasing hence total assets remain same.

2 Answer(s)


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When a company raises cash using stock, it has to issue new shares to the new shareholders
Hence the number of shares will increase.
Before raising money lets say the company has 1,000 shares, now the company will have 1,100 shares -? the 100 new shares will be issued.

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when a company raises cash by issuing more ADDITIONAL SHARES the ownership of company will be diluted to some extent. the number shares in the exchange of that particular share increases. in response to that the share price may came down.
the earning per share of the company will decrease substantially.
( if there is anything wrong in answer please let me know)

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