In finance, which option represents ownership dilution?

Ownership dilution occurs when a company issues additional equity shares, which leads to a decrease in the ownership percentage of existing shareholders. When new shares are introduced into the market, the total number of shares outstanding increases, thereby diluting the ownership interest of existing shareholders.

For example, if a company initially has 1,000 shares outstanding and a shareholder owns 100 shares, their ownership percentage is 10%. If the company issues an additional 1,000 shares, bringing the total to 2,000 shares, that same shareholder's ownership percentage is now reduced to 5%.

The other options present different financial actions that do not result in ownership dilution. Retirement of outstanding debt relates to debt management rather than equity. Acquiring treasury stock involves buying back existing shares, which can have various effects but does not dilute ownership; rather, it can actually consolidate ownership among remaining shareholders. Lastly, the payment of dividends is a distribution of profits to shareholders and does not impact the number of shares outstanding or dilute ownership percentages. Thus, the issuance of more equity shares is the only action that directly causes ownership dilution.