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Re: [Czechlist] TERM: diluted shares

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  • JPKIRCHNER@aol.com
    ... There s a great dictionary online that I ve just found: http://www.small-business-dictionary.org/ I think you can find something out from their definition
    Message 1 of 6 , Apr 30, 2003
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      In a message dated 4/30/03 9:01:28 AM, mjanda@... writes:


      > Yes, Jamie, that's what I understand. Diluted s.= all shares issued. But are
      > basic shares the same as common shares ???
      >
      > Probably they are not, as google returns multiple hits of "Basic common
      > shares"
      >
      There's a great dictionary online that I've just found:

      http://www.small-business-dictionary.org/

      I think you can find something out from their definition of diluted earnings:

      "DILUTED EARNINGS
      A situation whereby additional shares of stock were sold to other investors
      causing the earnings to be spread over a broader base. Thus fewer earnings
      are available for each share unless earnings grow proportionately more than
      the number of new shares issued."

      And here is something from the Oxford Dictionary of Finance:

      "DILUTION OF EQUITY
      An increase in the number of ordinary shares in a company without a
      corresponding increase in its assets or profitability. The result is a fall
      in the value of the shares as a result of this dilution."

      My understanding is that "diluted shares" are what you've got when a company
      has issued additional shares without, as the dictionary says, increasing its
      assets or profitability. Let's say a company had a million shares
      outstanding, and you owned 100, on which you got a dividend of 0.06. Then
      the company issues another million shares, and they spread the dividend over
      the new total of 2 million shares. Your shares have been diluted (remember
      that diluted literally means "watered down"), and now you're only getting a
      dividend of 0.03. This decrease in dividend yield will wind up lowering the
      value of your shares.

      Jamie


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