what is dilution of power in a company?
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Dilution occurs when a company issues new shares that result in a decrease in existing stockholders' ownership percentage of that company.
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The dilution of power in a company can be explained by a simple process when the process of decentralization takes place.
Explanation:
- When a company is born, most of the power is generally given to the members of the top-level management.
- The power is centralized and the other workers of the firm are not allowed to make any decisions.
- However, as a company grows in operations and business, it has to shift some power to the lower-level managers which is known as decentralization of authority.
- Decentralization of authority is a very important task to ensure that the activities of a business are done in an efficient manner.
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