An article by Martha Brannigan titled “Questioning the Books: AES Seeks to Reassure Investors Worried over Dilution of Equity” appeared in the Wall Street Journal on February 22, 2002.

Instructions Read this article and answer the following questions.

(a) Where does AES get additional unregistered shares to secure its loans? How are these shares reported in its financial statements?

(b) Exactly how does a company “register shares”? How does registering shares affect the company’s accounts?

(c) The article says registering the shares would dilute earnings per share. What is dilution? Why would registering the shares cause dilution?

(d) Why is measurement of dilution in earnings per share a problem for investors?